Home Buying Tips Archives Page 3 of 9

Five Things You Should Know Before Buying a House

April 7, 2023/in Blog/by Courtney Coon

Buying a house is one of the most significant financial decisions people make in their lifetime. Whether it’s your first home or a new property to add to your investment portfolio, purchasing a house requires careful consideration of several factors.

Here are the five things people should know before buying a house.

Know Your Budget

Before you start house hunting, it’s crucial to determine how much you can afford to spend on a house. Make sure you factor in all the costs associated with homeownership, such as property taxes, insurance, utilities, and maintenance expenses. You’ll also need to consider your down payment and closing costs. Knowing your budget helps you narrow down your search and ensures you don’t get in over your head with a home you can’t afford.

Location is Key

The location of a property is one of the most important factors to consider when buying a house. The location affects the home’s value, your commute to work, access to amenities, and the quality of the schools. Before you make an offer, research the neighborhood’s crime rates, property values, and proximity to public transportation, shopping centers, and other essential amenities. You’ll also want to consider the property’s proximity to major highways or airports if you travel frequently.

Work with a Local Lender

Local mortgage lenders offer personalized service that can help homebuyers navigate the complex process of obtaining a mortgage. Local lenders are familiar with local market conditions. We know our local neighborhoods, so we know what’s going, what the trends are, and we use that knowledge when helping buyers obtain mortgages. In a competitive market, a pre-approval from a local lender can help your offer stand out among the rest.

Hire a Real Estate Agent

A Real Estate Agent can help guide you through the home buying process, negotiate on your behalf, and offer valuable insights into the local real estate market. A knowledgeable and experienced Real Estate Agent can help you find properties that meet your needs and budget, navigate the home inspection process, and ensure that all the necessary paperwork is completed correctly.

Don’t Skip the Home Inspection

A home inspection is a crucial step in the home buying process. It helps you identify potential issues with the property before you finalize the purchase. A professional home inspector will thoroughly examine the property’s structure, electrical systems, plumbing, and other essential components to ensure everything is in good working condition. If the inspection reveals any problems, you may be able to negotiate with the seller to make repairs or adjust the sale price to account for the necessary fixes.

By knowing your budget, considering the location, hiring a real estate agent, conducting a home inspection, and working with a local lender, you’ll be better equipped to make an informed decision and find the perfect property for your needs.

Loan Programs Available for First-Time Buyers

February 9, 2023/in Blog/by Courtney Coon

Michigan Mortgage offers multiple loan options designed to help first-time home buyers achieve the American Dream.

FHA Loans.

These loans are backed by the Federal Housing Administration (FHA). This type of loan may be more attractive to someone who has less than perfect credit. They require a down payment of at least 3.5% of the purchase price.

VA Loans.

These loans are available to military veterans and active-duty service members (and their families) and are backed by the Department of Veterans Affairs (VA). They do not required a down payment and may have more flexible credit requirements.

USDA Loans.

These loans are available to buyers in rural areas and are backed by the U.S. Department of Agriculture (USDA). They do not require a down payment so this loan may be perfect for someone with less money saved.

Conventional Loans.

These loans are not back by the government and may have stricter credit and down payment requirements. However, they often have lower mortgage insurance premiums and may be a good option for buyers with good credit and a down payment as low as 3% of the purchase price.

MSHDA Loans.

The MI State Housing Development Authority (MSHDA) offers assistance programs for first-time home buyers, including down payment assistance zero-interest loans.

At Michigan Mortgage, we specialize in making the process as easy as possible for first-time buyers. We are Michigan’s leading lender for first-time buyers and are always available outside of “normal” business hours to help guide you home.

To see how we can help you, contact us today!

What are the benefits of homeownership?

January 23, 2023/in Blog/by Courtney Coon

Owning a home is a quintessential part of the American dream. Homes give families a sense of security and belonging. Homes are where holidays are celebrated and memories are made.

Homeownership has a variety of practical benefits, too:

Building equity: As you make mortgage payments, you build equity in your home, which is the difference between your home’s market value and how much you owe on your mortgage. As your equity grows, you can borrow against it or use it to secure a second mortgage.
Tax advantages: Homeowners may be able to deduct mortgage interest and property taxes from their federal income taxes. This can result in significant savings over the life of the loan.
Appreciation: Over time, the value of your home may appreciate, or increase in value. This can provide a significant financial benefit if you decide to sell your home in the future.
Forced savings: Making a mortgage payment each month is a form of forced savings, because you are paying into an asset that you own.
Stability and community: Owning a home can provide a sense of stability and a sense of belonging to a community. You can make your house a home, and you have the freedom to decorate and make changes as you wish.
Investment: Owning a home can also be considered as an investment that can appreciate in value over time. It’s one of the most common way of investment on real-estate.

Your Home Can Help You Build Equity

Equity is the value of the property that you own outright. Building equity in a home means increasing the amount of the property that you own outright. When you first purchase a home, the majority of your mortgage payments will go towards paying off interest on the loan, with only a small portion going towards paying off the principal balance. Over time, as you make mortgage payments, you will pay off more and more of the principal balance, which will increase your equity in the home.

Another way to build equity in a home is through property appreciation. If the value of the home increases, your equity will also increase, even if you haven’t made extra payments towards the principal balance. Additionally, making improvements to the home, such as renovations or adding square footage, can also increase the home’s value and your equity in it.

It’s important to note that building equity in a home also means that you are building an asset for yourself. You may be able to borrow against the equity in your home to make other investments or to use it as collateral for a loan. Also, when you sell a home, the equity can be a source of funds, either to buy another home or to use for other financial goals.

It is also worth noting that if you have an adjustable rate mortgage, or ARM, your payments may change over time, and it may take longer to build equity in your home. Furthermore, if the housing market is declining, it may be more difficult to build equity and even your home value may decrease.

Your Home May Provide Tax Savings

There are several tax advantages to owning a home, including deductions for mortgage interest and property taxes.

Mortgage Interest Deduction: The interest paid on your mortgage is tax-deductible, up to certain limits. The limits change periodically and it’s good to check the updated limit based on the Tax reform laws, but for tax year 2021, the mortgage interest deduction limit for a primary residence is $750,000 for mortgages taken out after December 15, 2017, or $1,000,000 for mortgages taken out before December 15, 2017. If you have a second home or rental property, the interest on those mortgages is also tax-deductible, but the limit is $750,000.
Property Tax Deduction: You can also deduct the property taxes you pay on your primary residence or a second home. The limit for property tax deduction is $10,000. Keep in mind that if you are in a high-tax state, it’s more likely to reach this limit, and thus more of your property tax will be tax-deductible.
Capital Gain Exclusion: When you sell your primary residence, the profits made from the sale are generally tax-free, up to a certain limit. For tax year 2021, the limit is $250,000 for single filers and $500,000 for married couples filing jointly. This means that if you sell your home and make a profit, as long as the profit is below the limit, you won’t have to pay taxes on it.
Points Deduction: If you paid “points” or “loan origination fees” to get your mortgage, you may be able to deduct these fees on your tax return.

It is important to keep in mind that these are the general tax benefits, but it’s always best to check with a tax expert or consult IRS website to get the most up-to-date information, and to understand how they may apply to your specific tax situation.

Your Home Might Appreciate in Value

The rate at which a house will appreciate in value can vary greatly depending on a number of factors, such as the housing market, location, and condition of the property.

In general, the national average rate of home appreciation over the past century has been around 3% per year. However, this rate can vary significantly depending on the location and the local housing market.

In some areas of the country, such as in large cities or high-demand areas, homes have appreciated at rates much higher than the national average, sometimes as much as 10% or more per year. In other areas, especially those where the housing market is weak, homes may appreciate at a rate that is lower than the national average, or may even decline in value.

In addition, you should keep in mind that the appreciation of a house is not guaranteed, it can fluctuate depending on the market conditions. As an example, during an economic recession, the housing market may decline, resulting in a decrease of home values, or in some cases, even a negative appreciation.

Your Home Can Serve as an Investment

A home can be considered an investment for a few reasons:

Appreciation: As mentioned earlier, over time, the value of a home can appreciate, which means the home may be worth more in the future than what you paid for it. This appreciation can be considered a return on investment.
Forced savings: Making a mortgage payment each month is a type of forced savings. The money you are spending on your mortgage payments is helping you to pay off an asset, as well as build equity.
Tax benefits: As I’ve also mentioned, the mortgage interest and property taxes are both tax-deductible which can provide a significant tax savings for homeowners, which in turn can increase the return on investment.
Rental income: If you own a home, you may be able to rent out a portion of it or the entire property, this can provide additional income.
Future use: A home can also be considered an investment because it can be used for future financial gain, such as being able to sell it for a profit, or using it as collateral for a loan.

It’s worth noting that like any investment, homeownership has its own set of risks and uncertainty. Market conditions, interest rates, and other factors can affect the value of a home, and there’s no guarantee that a home’s value will appreciate. Therefore, it’s always good to do your own research and consult with professionals before making a decision.

If you need help with the mortgage process, give us a call!

How do interest rates impact your home buying power?

October 13, 2022/in Blog/by Courtney Coon

If you’re researching mortgages, you know that they come with interest rates. What exactly is a mortgage interest rate, and how much does it impact your buying power? What can you do to improve the interest rate you’re offered? We answer those questions in this article.

Your mortgage interest rate has a direct impact on how much house you can afford. What exactly is a mortgage interest rate?

A mortgage is a loan, and like other bank loans, it comes with an interest rate – it’s how lenders make enough money to stay in business. This is usually a percentage of the loan amount, and you pay it off alongside the principal. Usually, this makes up your monthly mortgage payment, along with things like private mortgage insurance (PMI), property taxes, and perhaps homeowner insurance.

How Your Mortgage Interest Rate Affects You

As the interest rate is part of your monthly mortgage payment, it directly affects how much of a loan you can afford. Even a small change in your interest rate can add quite a bit. For example, let’s say you bought one of Michigan’s average-priced houses for $210,000.

You managed a 10% down payment and got a conventional 30-year loan. At a 4% interest rate, you’re paying 1,264.40 per month. At 5% interest, this payment increases to $1,376.68. That’s $112 more per month – and 10 more PMI payments.

So, it’s pretty obvious how much your budget is impacted by mortgage interest rates. But what factors affect the interest rates themselves?

What Affects Mortgage Interest Rates?

Banks calculate interest rates based on many things, including the overall economic and market picture and the qualifications of each prospective borrower. We’ve already talked about factors that influence mortgage interest rates elsewhere in this blog, so let’s just do a quick overview of some of the factors you can influence:

Your credit score and credit history.
Your income and debt.
Your down payment amount.
The type of loan you choose.

Although a lot has been said about the Federal Reserve rate rising, it’s important to realize that this doesn’t directly affect your mortgage interest rate. (It does affect other types of loans, like credit cards.) However, the Fed is a good indicator of where the economy is heading, so it doesn’t hurt to keep an eye on it.

10 Things to Do Before You Buy a House

September 14, 2022/in Blog/by Courtney Coon

Are you ready to start shopping for your first home? Before you begin, take a look at these 10 tips to make your home-buying journey successful!

Few things are as exciting as making a real estate purchase – and few things cause more stress! To help you out, we’ve compiled a list of 10 tips to help you navigate the process of buying your first (or second, or third) home. These won’t just reduce some of the anxiety, they’ll also help you avoid costly mistakes!

10 Tips for New Home-Buyers

Know where and why you want to buy. The answers to these questions will help you understand what factors should be most important in your decision. For example, is your choice of neighborhood determined by your work, being close to family, or just that you fell in love with the area? Is this going to be a starter house that you’ll want to upgrade in a few years, or are you in for the long haul? Clarity here will help you make a purchase that’s in tune with the other parts of your life.
Give yourself a financial health checkup. Start saving and paying off as many outstanding bills as you can. Check your credit report and get any errors removed. If you do this now, you’ll have a better understanding of what your budget really is – and a jumpstart on the mortgage preapproval process.
Research neighborhoods, prices, real estate agents, and mortgage lenders. While the first two are a given, doing your homework on real estate agents and mortgage lenders is just as important.
Plan your budget and down payment. Once you’ve gotten a clear idea of your financial status, figure out how much home you can afford and how much of a down payment you’ll need – and can manage. Hint: Down payment assistance is often available through state and other agencies.
Understand how the mortgage and home-buying process works. We’ve covered this quite a lot in this blog. See our posts on mortgage underwriting and the path to home ownership for more details.
Get pre-approved. We’ve covered mortgage pre-approval and why it’s so important elsewhere in this blog. Suffice it to say that you can make a stronger offer on a home when your mortgage is pre-approved.
Prepare yourself mentally and emotionally. This is a very hot real estate market. Competition is intense, so be prepared to deal with sticker shock and maybe some disappointment if some other buyer beats you to a house. Be flexible and don’t give up. And know that it’s not just you; most home-shoppers are dealing with the same things.
Review mortgage paperwork and requirements. Yes, there are mortgage professionals who will be reviewing these documents. But look them over yourself; not only will you be legally committing yourself to the terms, any mistakes you correct now will mean one fewer potential snag later.
Verify all information in the listing. Make sure the house you are purchasing is all that the sellers claim. Make sure all the features and amenities, all the room sizes, are as advertised.
Get a home inspection. This is different from a home appraisal, which is mostly about verifying the value of the house and any property. A home inspection looks for potentially costly building, health, and safety issues, and you don’t want to skip that.

Finally, remember that the mortgage provider you choose will have a big impact on your decision. Make sure you’re working with one like Michigan Mortgage that will help you explore all your lending options and choose the one that’s right for you!

Beat the Rates with a Buydown Program

August 3, 2022/in Blog/by Rob Garrison

With the interest rates increasing, it’s important to find ways for buyers to continue to buy properties and have payments they can afford. A “Buydown” is a great way to do that.

Buydowns come in the form of 3-2-1, 2-1 and one-year buydowns.

How it works: funds from the seller pre-pay the buyer’s payment for 1, 2 or 3 years. For example, on a 2-1 Buydown, the interest rate is 2% lower than market in the first year, 1% lower the second year and market the third year.

Let’s assume a home is being sold for $300,000 and the buyer is putting 5% down. To attract more buyers, the seller has agreed to pay $6,100 toward a 2-1 Buydown. If the current market rate is 5.5% then the buyer’s payment for the first 12 months would be at 3.5% or $1,279/month. For the second year, the payment would be based on a rate of 4.5% or $1,444/month. Starting in the third year, the buyer’s payment would be at 5.5% for the remaining 28 years or $1,618/month.

The cost is calculated by taking the difference between payments in year one and your 3×12 plus the difference between payments in the year two and year 3×12. In our example above the total cost would be $6,100. The monthly reduction in payment for the first year would be $339 and the $174 during the entire second year.

This may be a much more attractive option for a buyer than going into some sort of an adjustable rate (ARM) product that has more risk with it. Remember, an ARM will eventually adjust to the market rate and there is no guarantee that rates will be lower when that ARM starts to adjust.

The Buydown uses current market rates but allows the buyer to buy a home at a more affordable price with the risk of the ARM. Additionally, this a great way for buyers who are likely to make more money as they continue their career to ease into the payment.

But what is in this for the seller. Why would they do this? The answer is that the seller May be willing to concede $6,000 more readily than dropping their sale price by $10,000 or $15,000 when their house is not selling. Additionally, by offering this option to buyers they may get more interest from more buyers creating more competition.

We used to do 2-1 Buydowns years ago when rates were higher. But for the last several years with rates at all-time lows, they were forgotten. Now that rates are creeping up again, it may be good time to blow the dust off this product and help more buyers realize their dreams.

If you have questions about 2-1 Buydowns, give us a call! We’re happy to help in any way we can.

Who’s responsible for paying closing costs?

June 22, 2022/in Blog/by Courtney Coon

More often than not, buyers and sellers are responsible for covering the costs of their respective closings.

Buyers can expect to pay 3 – 6% of the loan amount in closing costs. Sellers, on the other hand, typically pay 5 – 6% of the sale price to their Realtor.

But that’s not always the case. Here are a few ways buyers can get someone else to help pay their closing costs.

Seller Concessions

Buyers can sometimes avoid paying closing costs (or at least a portion of them) if they ask the sellers to pay them instead. This is called seller concessions.

Each loan program is different, as shown below.

Conventional: Up to 3% of the home’s value with a down payment of less than 10%. Up to 6% with a down payment of 10 – 25%.
FHA: Up to 6% of the home’s value.
VA: Up to 4% of the home’s value (there are some exceptions to this rule).
RD: Up to 6% of the home’s value.

In today’s competitive market, this may not be your best option, as sellers are hoping to net as much as possible when closing on the sale of their home. Your Loan Officer will explore all options and help guide you in the right direction.

Gift Funds

Financial gifts from loved ones can be used to fund your down payment and closing costs. In most cases, a “loved one” is defined as a family member, fiancé, or domestic partner.

Gift funds must be properly sourced and documented to avoid hiccups during the underwriting process. The gift must include a letter that states the funds don’t have to be repaid by the buyer.

For more information, reach out to your Michigan Mortgage Loan Officer.

Down Payment Assistance Programs

Are you familiar with the Michigan State Housing Development Authority, otherwise known as MSHDA?

MSHDA offers a variety of down payment assistance programs to help buyers purchase their forever homes. Each program is different, but here are a few general MSHDA guidelines.

Michigan Mortgage has been named the No. 1 MSHDA Lender in Michigan (and West Michigan) since 2016. There are many MSHDA misconceptions in our marketplace – it’s a hard program to master. But our knowledge and expertise has set us apart from our competition.

We recommend that you explore all options with your Loan Officer before writing an offer. Give us a call if you have questions! We’re here to help in any way we can.

What is a Reverse Mortgage?

June 14, 2022/in Blog/by Courtney Coon

A Reverse Mortgage is a home loan for seniors, age 62 or older, where they are able to use the equity in their home to get cash income and have the security of not having to pay monthly mortgage payments back.

In the past, Reverse Mortgages were viewed in a negative light. That’s changing! There are many benefits to a Reverse Mortgage that consumers are unaware of.

How can a Reverse Mortgage help you achieve financial freedom?

Improve your monthly cash flow.
Payoff medical bills, auto loans and credit card debt.
Make home improvements (to modify the house to stay longer or for deferred maintenance).

Benefits of a Reverse Mortgage

Eliminates monthly mortgage payments.
Proceeds are not taxable.
Heirs get to keep the equity in the property and can never owe more than the house is worth.

Should you get a Reverse Mortgage? According to Forbes, “A reverse mortgage may be helpful but isn’t for everyone. There are a few factors that can make a reverse mortgage worth it:

Your home is increasing in value considerably. If you’re building up a lot of equity in your home, you may be able to take out a reverse mortgage and still have money left over for your estate.
You plan to stay in your home for a long time. Just like a regular mortgage, there are significant upfront costs associated with the loan. You’ll want to be sure you plan to live in that home long enough to make those costs worth it.
You can cover the costs of your home. Since staying current on property taxes, insurance, maintenance, etc. is required to keep your reverse mortgage current, it’s important that you have plenty of cash flow for these expenses.”

If you have considerable equity in your home and are looking for ways to use that equity as a form of income, a Reverse Mortgage may be for you! Reach out to your Michigan Mortgage Loan Officer for more information.

5 Reasons to Choose a Local Mortgage Lender

April 21, 2022/in Blog/by Courtney Coon

Buying a home might be the single biggest purchase you make in your life. You want it to go right. That is why the mortgage lender you choose is critical to making sure your homeownership dreams come true and the experience is hassle-free.

Whether you are a first-time buyer needing assistance through the lending process or you are an existing homeowner seeking to refinance or purchase a vacation home, it pays to go with a local lender as opposed to a big-name national bank or brand.

Here are 5 reasons to choose a local mortgage lender like Michigan Mortgage.

1. Personalized Service
A local mortgage lender gives you the chance to to work face-to-face with an expert, if need be. The growth of digital mortgages, like our Pro SNAP app, has eliminated the need for as much face-to-face meeting in the past, but as a home buyer it can be reassuring to know that your loan officer is right around the corner as opposed to across the country or overseas.

A local lender gets to know you. Your messages won’t sit in a voicemail box unanswered for weeks on end. With Michigan Mortgage, you’ll get a cell number for your loan officer and can call or text them at a moment’s notice to get your questions answered.

2. Local Expertise
Another advantage of local lenders is their familiarity with local market conditions. We know our local neighborhoods, so we know what’s going, what the trends are, and we use that knowledge when helping buyers obtain mortgages.

For example, a national lender with no roots in the local community may be reluctant to approve a mortgage for an atypical property, such as an original farmhouse on acreage that’s now covered by a subdivision. A local lender like Michigan Mortgage will know the history of the area and the changing demographics and economic trends and may be more comfortable underwriting such a loan.

Local lenders also have their finger on the pulse of the local or regional economy, and have a better sense of the lending risks in the area. What looks to a big lender like a dilapidated section of town might actually be an up-and-coming area where properties re increasing in value. Local lenders will know this.

Local lenders may also be more attractive to some home sellers and real estate agents who want an efficient and timely closing. Reputation matters. In situations where several offers are on the table, having a local, trusted lender could be the difference between closing or not closing.

3. Realtor Relationships
Local lenders invest a lot of time and effort building relationships with local Realtors. Realtors and lenders are the yin and yang of real estate. Michigan Mortgage loan officers are on a first-name basis with most of the real estate agents in their local areas.

Also, with everyone on your team – the Realtor, the lender, you– working in proximity, a closing can happen quickly and without hassle. The final stage of home buying is sometimes the most stressful. Having a unified team that is familiar and comfortable with each other can make the process quick and painless.

4. Varied and Specialized Products
Local lenders have a better understanding of property values and the local economy. When you work with Michigan Mortgage, you’re paired with a licensed loan officer and team of professionals who are experts in your region. Our loan officers help you choose the right type of loan for your circumstance and we keep you updated along the way. We have in-house tools and resources to expedite a loan, ensuring everything is taken care of in a timely manner.

Local lenders are where you’ll find the specialized loans the big lenders won’t bother with. Maybe you want an adjustable-rate mortgage with a 15-year lock? Or you want to buy a vacation property that lacks a furnace? Or you want to buy or refinance a home for less than $100,000, an amount too small to be of interest most lenders? Or you want a jumbo loan?

Local lenders are have more flexibility. Big banks need process large numbers of loan applications. To do that, they have rigid guidelines about who they will and won’t lend to. Big banks are more about volume than customer service.

At Michigan Mortgage, we have been Michigan’s leading MSHDA first-time buyer lender for 6 straight years. We are also a recognized USDA rural development leader.

5. Reliable, Responsive & Flexible
Local lenders are better at closing loans on a timely basis. If the closing of a loan has to be extended by a week, local lenders are more flexible than big banks who have corporate mandates to crank out the volume.

Local lenders, along with local real estate agents, have an incentive to provide you with excellent service because they want you to be a referral source for future business. They stake their reputation on each and every customer.

With a local lenders, you are much closer to the decision makers with the authority to approve your mortgage. You aren’t dealing with a corporate bureaucracy.

Michigan Mortgage loan officers are more likely to get personally involved in qualifying you for a mortgage, as opposed to big banks. Often, it’s a matter of the getting to know you. Perhaps you are self-employed with irregular income. Or you have poor credit due to a financial crisis, but have good income and low debt.

Michigan Mortgage loan officers are better suited to be responsible and flexible for borrowers like these.

At Michigan Mortgage, you will never be just a name or number on a loan application. We manage every step of the mortgage process, from application to underwriting to closing, to make the process easy. We have been financing the American homeownership dream for nearly three decades. We can do the same for you.

Everything You Need to Know About MSHDA

April 12, 2022/in Blog/by Courtney Coon

Did you know that Michigan Mortgage was named the #1 MSHDA Lender in 2021?

In fact, our very own Dave Lehner was named the #1 MSHDA Loan Officer in West Michigan in 2021!

There are many MSHDA misconceptions in our marketplace – it’s a hard program to master. But our knowledge and expertise has set us apart from our competition.

Dave and Rob sat down with Alex Craig of the Dolinski Group to talk all things MSHDA and share their experiences over the past 25 years.

If you have questions about MSHDA, don’t hesitate to reach out! We’re here to help in any way we can.

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