Making Sense of Refinancing

If you keep hearing about the “historically low refinancing rates” and are wondering whether or not refinancing your mortgage is right for you, you’re not alone. Refinancing can seem like a complicated topic, but we’re here to help you make sense of it all in a way that’s straightforward and easy to understand.

What is Refinancing?

In short, refinancing is replacing your existing mortgage with a lower-interest loan. With new terms, you can use the money from refinancing to pay off your old loan. There are lots of reasons to consider refinancing, especially if the difference between the interest rate on your old home loan and your new one are considerably different.

Why Should You Refinance?

There are several reasons you’ll want to consider refinancing. By refinancing with a lower interest rate, you’ll save money every month which you can use on other things or save. If you refinance into a loan with a shorter term, your monthly payments will go up but you’ll be able to build equity in your home faster and therefore pay off your mortgage sooner.

If you do a cash-out refinance, you can turn the equity you’ve built in your home into cash that you can tap into and spend whenever you want without worrying about tax penalties. There are a lot of options to consider as well as how you want to proceed with the refinancing. Everyone has their reasons and it’s important to understand the pros and cons fully before you decide.

Is Refinancing The Best Option for You?

It’s hard to give a definitive “yes or no” answer to “is refinancing right for me?”. You’ll need to consider your financial goals in the short term as well as the long term. Do you want to lower how much you spend on bills every month? Do you want to shorten your loan term and pay off your mortgage faster? These are both great reasons to consider refinancing.

Another point to consider is your credit score. If your credit score is exceptional (800+) or very good (740-700), you have a higher chance of refinancing with better interest rates than someone with porter credit. Keep in mind that once you factor in closing costs, it can take time to break even with your savings.

If you’re thinking of selling your home soon or moving, refinancing may not be a good idea, but if you plan to stay and you’re thinking of making improvements, cash-out refinancing can help you put that money back into your home so that should you decide to sell in the future, you can sell it for more. For example, consider how much you could add to the selling price if you add a new roof, a finished basement, or a new kitchen remodel.

There are a lot of points to think about, but that doesn’t mean that you have to do it all on your own. Our experienced, knowledgeable and friendly loan officers can help you make sense of the process as well as answer any questions you may have. We’ll take the time to understand the big picture as well as your goals in helping you decide if refinancing is right for you.

Contact our top mortgage broker today to learn more about your refinancing options and how to take the next step!

You’ve built your own business from the ground up. It’s one of the many things you consider your pride and joy. You often dream of looking out of your office window, at your yard, and your home. But are you really prepared for home ownership? Many self-employed individuals look at home ownership as a way to avoid putting money in their landlords’ pockets and instead putting it toward building a mortgage and in turn, building equity in their own place

But before you take the plunge, it’s important to understand how home loans for the self employed work. Before you choose to buy a home, consider the following:

Your Income Must Be Consistent

Being able to pay your mortgage on time isn’t just a sign of financial stability. It’s the law. A mortgage lender can initiate the foreclosure process in as short as the time frame as a single missed payment or two, so it’s definitely not something you want to make a habit of. Even if you’re thinking about applying for home loans for the self employed, it’s important that you have consistent and reliable income coming in and that you have a way to document this, by way of your bank statements, for example.

You want to be able to demonstrate to lenders that your finances are reliable and that you have a constant stream of ongoing income coming in. If you’ve just switched jobs or had a drop in income, it may be worth waiting a bit before you elect to purchase a home, since these can be red flags when you’re trying to get a home loan.

Check Your Credit

Your credit score and credit history all affect your ability to buy a home. Having good credit means you’ll pay less in interest, even if you pursue home loans for the self employed. You may also have a lesser down payment to put down on your home if your credit is better. Average credit doesn’t mean you’re out of luck, but it does mean you may pay more. Ideally, you’ll want to work on your credit to get it as good as it can be before you move forward with buying a home.

A few percentage points may not seem like they make much of a difference, but over the course of a 15, 20 or 30 year mortgage, they definitely can add up to thousands of dollars, so do what you can to improve your credit if it’s not as good as it could be.

Can You Properly Care for the Home?

Home ownership means more than just paying your mortgage. You’ll need to do regular maintenance as well, which can include lawn and garden care, repairs, changing out filters, spraying for bugs and more. Unless you have the extra funds to pay a specialist to handle these things for you, they all fall on you. If you’re swamped with work and don’t have time (which can be a great thing), or you just don’t want to deal with the hassle of upkeep, you may be better suited for renting.

Getting Started with Home Loans for the Self Employed

If you’ve read this far and you’re ready to put in the time, money and effort that comes along with home ownership, then congratulations, you’ve taken the first step forward with confidence. The next step is finding out what your options are in terms of home loans. And although there are not specifically home loans for the self employed set aside, you may be able to get a lower interest rate if you’re able to use your self-employed income to make a larger down payment on the home, or if your credit is good and your income stable and regular.

All of these things show lenders that you are not only responsible, but a safer bet to lend to than someone with poor credit, flaky income and other red flags. If you’re in a stable position to buy a home and you’re planning on staying where you are for awhile, home ownership could be the right choice for you.

With that being said, it’s a big step and not one that you want to take lightly. To learn more about what loans are available for the self-employed and what options you have available to you, give us a call. We’ve worked with thousands of self employed individuals and understand your unique needs in getting financing for your home purchase.

As a homeowner, you’ve already put in the hard work to purchase a home. Between the long search, multiple showings, contract agreements, inspections, and finally closing on the property, you’ve earned the right to say that your home is yours. But with homeownership comes the associated task of maintaining your property. Without a landlord, all the maintenance, repairs, and upgrades are your responsibility. That responsibility includes the added cost of paying for contractors and materials.

Unfortunately, those costs often come at the least opportune times. Right after you’ve closed on the house, your liquidity has vanished with the required down payment, and large expenses don’t always wait until you’ve had a chance to recoup your emergency fund. The good news is that there’s a solution: a home equity line of credit (HELOC). Getting a HELOC can return you to a position where you can have the funds you need to pay for repairs, debt consolidation of high-interest loans, or even a much-needed vacation.

The Process of Acquiring a Home Equity Line of Credit

You’ll be happy to hear that it’s a lot easier to get a HELOC than buying a house in the first place. There are two major considerations to determine your eligibility and the size of your credit: the loan to value ratio (LTV) and the combined loan to value ratio (CLTV). As the names suggest, these two concepts are closely tied together, so we’ll examine each of them in turn.

The LTV is determined by taking the assessed value of your home and comparing it to the outstanding amount on your mortgage. Many firms use 80% as a cutoff point, so if you have a $200,000 house and owe $170,000, you may have difficulty finding a HELOC. If you only owe $100,000, however, your LTV is 50% and you will have a much easier time securing a HELOC.

CLTV takes the LTV and compares it to the banks’ HELOC limit. In most cases, this will range from 80-85%, so the difference between that number and your LTV is your CLTV. To use the example from above with a home valued at $200,000 and a remaining mortgage of $100,000, you would likely see a HELOC offer of up to $60,000, bringing you to an 80% CLTV.

What Makes a HELOC Desirable Compared to Other Loan Options?

You likely recall that you were able to acquire home loans in Los Angeles long before you bought a house, whether using a credit card or signing an unsecured personal loan for short-term expenses or debt consolidation. In most cases, a HELOC is a stronger option than what you could acquire without the value of a home to secure it. To put that in direct comparison, your credit cards can range from 16-28% interest, while an unsecured loan may fall in the 9-16% range depending on your credit and obligations. A HELOC, on the other hand, may be in the 3-6% range depending on your credit and CLTV.

The math is not always so straightforward when it comes to other secured loans, however. Look carefully when you plan to use a HELOC to purchase a new vehicle, as you may find better rates with an auto loan secured by the purchased vehicle.

Stay Informed: Know the Risks

The reason your HELOC will be low interest is that it is a second lien against your home. You can secure low monthly payments by opting for a term extending five, 10, or even 15 years, but if you ever default, then your home is at risk for foreclosure. Take the time to discuss this with your financial adviser to see if this risk is worth the benefits.

Ultimately, deciding to open a HELOC is a decision that you must make for yourself. It can often reduce your interest payments compared to other loans, and the interest you pay on it will itself be tax-deductible, so there are significant financial benefits to choosing a HELOC compared to an unsecured loan. Nevertheless, the risk is real if you default on the loan, so take some time to determine if this is right for you.

There is a one sure way to avoid paying for private mortgage insurance when buying a house – putting at least 20% down. But what if you can’t?

Let’s start form the basics and work our way to answering this question.

What is Private Mortgage Insurance (PMI)?

PMI is designed to protect lender in case you become unable to make your mortgage payments. It exists because, typically, if the borrower defaults the home is sold at auction, which means it can sell at least 20% less than its true value due to damage or neglect. Thus, PMI offsets the risk of borrower defaulting.

PMI is offered by privet insurance companies, hence the name, as oppose to government issued insurance which covers FHA loans. Furthermore, PMI will end once the homeowner’s equity reaches 20% of loan amount. In comparison, the FHA MIP can only be cancelled if the property is refinanced.

How much does it cost?

PMI, same as any other insurance, is based on your particular risk to the bank. In other words, the lower your down payment, the higher your PMI costs. Typically, annual prices for PMI vary from 0.3% to 1.15% of your loan amount. Your exact rate is calculated depending on your credit score, equity and loan term.

When and how can you cancel PMI?

In general, you can cancel your PMI once the principal balance of your loan drops to 80% of original appraisal, or current market value. However, a few restrictions may apply depending on your provider, for example, showing history of timely payments or absence of second mortgage.

How can you avoid PMI other than making 20% down payment?

If you do not have a 20% down payment and not an eligible military borrower, who can apply for VA loan, you can still avoid PMI.

Most of the lenders offer Lender-Paid PMI, which is basically same thing except the lender pays it on your behalf. In this case, you will be requested to accept a 0.75% rate increase. However, we strongly encourage you to discuss this option with your lender, because LPMI could not be cancelled like PMI can.

There is another option you may consider in order to avoid PMI. The, so called, “piggyback” financing. This option, however, will require a 10% down payment. Simply put, the piggyback financing is when you take two mortgages. The first mortgage is a loan on your home and the second to cover additional 10% for the down payment. Such structure is often referred to as 80/10/10, in which 80% is your home loan, 10% second mortgage and 10% down payment.

So, to conclude and answer our original question, yes, there are ways to avoid PMI. However, we recommend not to make this decision on your own but rather consult with your broker.

LBC Mortgage
4605 Lankershim Blvd #421
North Hollywood, CA 91602
Phone: (818) 309-2999
Website: https://www.lbcmortgage.com/

Regardless of whether you are applying for a new mortgage or refinancing you existing Los Angeles home, the lender wants to be sure that you can afford it. In order to determine that the lender will evaluate your debt to income ration, or DTI.

A high debt to income ratio could make getting approved for a new loan quite a challenge. However, there is a way to manage the situation and make the numbers work. Remember, lenders value low DTI, not high income.

First, let’s clarify what is DTI and how it is calculated.

What would be considered as debt in calculating DTI?

• Housing related expenses, such as:
• Your future mortgage payment
• Homeowner’s insurance and property tax
• HOA dues, if there will be any
• Minimal payments towards your other debt, such as:
• Student loans
• Credit card payments
• Child support and alimony
• Auto loans

DTI compares your total monthly debt, consisted of above mentioned, to your income before taxes. Let’s put in the numbers to illustrate. Say, your monthly income is $10,000 before taxes. Your current debt consists of mortgage, property taxes and insurance, which comes to about $2,000. Of course, you have a car, which is, for the sake of example, costs you about $500 a month. Let’s also assume, you have credit card payments or maybe a student loan, which in sum comes up to about $500. Which brings us to total of $3,000 of debt payments. Now, let’s plug it in the formula:

DTI = Monthly debt payment/ Gross monthly income = $3,000/$10,000 = 30%

Thus, your debt to income ratio is 30%.

What if you have a high DTI?                                                                                    

The above example shows desirable DTI, however, a higher DTI is acceptable. In fact, lenders might consider a 44% DTI, assuming a perfect credit record and other variables. But what if your DTI is higher than 44%?

Luckily, you still have options. Here is what you can do:

1. Look in to more forgiving loan programs. For instance, Fannie Mae sets a maximum DTI at 35% for those with lower credit scores and smaller down payments and at 44% for those with better credit record and higher down payment. In comparison, FHA loans allow a DTI as high as 50% with a credit score as low as 600. In addition, FHA loans do not require a high down payment.
2. Restructure your debts. There are a few ways to twig your debt, for instance, you can refinance you student loan. Extending, or spreading out, if you will, your student loan over a longer term will help you bring your payments down which will, in turn, lower your overall monthly liabilities and consequently your DTI. Your credit card debt can be reduced as well through transferring your balance to a new account with a 0% introductory rate.
3. Pay down, or pay off your accounts.
4. Cash-out refinance. You can lower or eliminate your debt by taking cash out.

These are just a few ways to get approved with a higher DTI. To learn more, please contact our professional Los Angeles broker at (818) 309-2999 or use online contact form.

Will 15-year mortgage work for me?

This question seems rather popular this days. With the rate drop over the last few month the interest towards the shorter term mortgages has grown in proportion. Of course, there are quite a few advantages to the 15-year term, however, at the same time, there are a few things to consider.

Well, let’s take a look at the differences between a 15 and 30-year terms.

As we mentioned above, there are a few advantages to the 15- year term. First goes without saying, the 15 year term is just a half of the 30 year term. However, it is important to keep in mind that since the loan is not as “stretched out” your monthly dues will be higher.

Yes, having a higher monthly payment might be scary, but let’s look at the bigger picture. The rates for 15 year term go as low as 2.75%, whereas, a 30 year term would rarely go lower than 3.5%. Which means, that less mortgage interest will be accrued each month.

In other words, if we combine a shorter term with lower interest we get a homeowner who was able to save hundreds of thousands of dollars. This scenario looks appealing, isn’t it?

Well, here’s another advantage of a 15 year term – the 15 year fixed rate mortgage is designed to aggressively pay down your principal. To compare, at today’s rates with 15 year fixed rate mortgage the first payment is 66% principal and 34% interest, whereas, with 30 year fixed mortgage only 35% goes towards your principal. In addition, with the 30 year fixed rate mortgage your payments do not include the same principal to interest ration until your loan reaches 18 years.

Let’s get back to original question: will 15-year mortgage work for you?

Before we can answer this question, there are a few things to take into consideration. Yes, the 15-year term mortgage can provide a sizable long-term savings in comparison with longer term loans. However, this term does not fit everyone.

As mentioned above, your monthly premiums will be higher with the 15 year term, which can be a budget-breaker for some households. The same reason, could make it harder to qualify for such loan because of the debt-to-income ratio required by the lender. So, talk to your broker to determine if 15 year term would be a good move for you.

We are proud to announce a publication of an exclusive interview with our leading professional Alex Shekhtman. Last week a local Russian news paper "Kurier" has published a new how-to guide dedicated to helping home buyers. This guide will also have information useful to anybody who is interested in refinancing their existing loan.

Interested parties are invited to review the how-to guide in full on their website: https://lbcmortgage.com/

This article from LBC Mortgage Solutions contains precise and detailed steps and instructions, designed to be used by people interested in lowering their existing rate by refinancing loan and others who are interested in buying a new house, helping them go through a loan application process, as quickly, easily and with as little stress as possible.

Alex Shekhtman states that this accessible, easy to follow guide provides all of the information necessary to fully understand the topic, to get the results they want.

The Full How-To Guide Covers:

- Trust your broker – trust should not be underestimated

- Professionalism and experience are the most important aspects – your broker should be well educated and have solid experience

- Professional connections – a broker with well established professional connections will make applying for a loan a lot less stressful

When asked for more information about the article, the reasons behind creating a guide on How to make a process of buying a property stress free: broker's advice and what they hope to accomplish with it, Alex Shekhtman, broker at LBC Mortgage Solutions said: “I often hear people referring to an experience of buying or refinancing a house as a night mare. While I'm regrading the fact that these people had such a bad experience, I assure you, it should not be as difficult and frustrating. I hope this interview will help people understand that selecting a good, trustworthy and experienced broker, who values his professional relationships with lenders will make a huge difference in the entire process of buy or refinancing their property. ”

More information about LBC Mortgage Solutions itself can be found at https://lbcmortgage.com/about-us/

Believe it or not, but getting a mortgage approval is not as hard for the majority as keeping it. There are a few bumps in the road, so to speak, that you should avoid.

The entire process of closing a loan takes about 45 days, give or take, in today’s market and during this time any and all events may affect your loan. For instance, losing you job or becoming ill will greatly affect your mortgage loan approval. During this time the lender has a right to revoke your mortgage approval.

Of course, such life changing events are not easy, if not, at times, impossible, to control. However, there are a few things you can keep in check. With that in mind, here is a list of things you should avoid doing between the date of the application and date of funding. Each one of these items could instigate a revocation of your approval.

• You should refrain from career changes, such as leaving your current job to change industries or start your own company. This also includes switching from salary to commission paid job.
• Buying or leasing a new more expensive car might not be a great idea either. Of course, if you lease is about to expire you would have to renew it. However, you should definitely consult with your loan officer first.
• Transferring large sums of money between accounts should be avoided.
• Pay your bills on time, this one goes without saying.
• Avoid opening new credit cards, even if they offer great condition. Remember, any new inquiry on your credit report will have to be explained to the lender.
• Refrain from random undocumented deposits to your accounts. This includes cash gifts without proper paperwork. Undocumented cash deposits will provoke the lender to disallow the gift and revoke you loan.

Of course, these are just a few things we came up with. Surely, there is more. It is our mission to help you through this complicated process and successfully fund your loan.

Find more information on our Los Angeles mortgage broker website.