Home Equity Loan or Cash-Out Refinance: Which Is Right for You?

Home equity loans and cash-out refinance loans both allow you convert the equity in your home to cash you can access immediately. Either option can provide you with the funds for renovations, repairs, debt consolidation or anything else you need.

Here, the Integrity First Lending team looks at the differences between the two types of loans and shares expert insights on how to decide on the best way to borrow against the equity you have in your home.

Home equity and refinance loans Utah

What is a Home Equity Loan?

A home equity loan (HEL) is a second mortgage, one that does not alter the terms or conditions of your current mortgage. As it is a completely separate loan, an HEL comes with a separate payment.

The amount you can borrow varies by lender, but is usually between 75 and 90 percent of the equity you have built. The proceeds are paid out in a single lump sum.

What is a Cash-Out Refinance Loan?

A cash-out refinance loan replaces your current mortgage with a loan for an amount higher than what you owe. With this option, you will end up with just one mortgage payment.

At closing, you will receive the borrowed funds in a lump sum. As for how much you can borrow, that depends upon the loan type. Most require that you leave some equity in the home, but you may be able to get a cash-out loan for 100 percent of the value in your home.

Deciding on the Best Way to Borrow Against Your Home Equity

If refinancing would mean taking a significantly higher mortgage interest rate, an HEL may make better sense. The same may be true if you want a short-term loan and plan to pay if off quickly, as HELs have lower closing costs.

On the other hand, a cash-out loan might be a smarter choice if your home value has risen or if refinancing can lower your interest rate. Keep in mind, however, that this option could add extra years to your mortgage term, as it essentially resets your first home loan.

In addition, you have a third option to consider. A home equity line of credit (HELOC) allows you to tap into the value of your home, drawing out money as you need. HELOCs function much like credit cards — as you repay the balance, the money becomes available again. A HELOC can be a good source of funds for major repairs and upgrades, but having easy access to cash can tempt some people to make unwise financial decisions.

What is the right loan solution for you? Only you can decide if a home equity loan, cash-out refinance loan or HELOC makes the best sense – but practical advice from a mortgage expert can be invaluable.

Integrity First Lending, a leading Utah mortgage broker, can help you find a financing solution that meets your needs. We can explain your options, answer your questions and assist you in shopping for a loan with the best interest rate and terms. Contact our South Jordan or Tooele office to discuss home equity loans and cash-out refinance loans today.

What are Mortgage Discount Points?

When you take out a home loan, your lender may ask if you want to pay for any mortgage discount points.

Paying for points is a way of prepaying interest on your mortgage. The more you buy, the lower your home loan interest rate will be – which is why the process is referred to as “buying down the rate.”

For more details on mortgage discount points and practical advice on when paying for them is a smart move, read on.

Understanding discount points for home loans

How Discount Points Affect Mortgage Interest Rates

One point is equal to one percent of your home loan. So, if you take out a home loan of $300,000, you will pay $3,000 for a full point. In exchange, your lender will typically reduce your interest rate by .25 percent.

Depending upon your mortgage lender, you may have the option of paying anywhere from half a point to several points. Or, of course, you can decide not to buy any at all.

How Buying Points Changes Monthly Mortgage Payments

Paying for discount points brings down your interest rate, which therefore reduces your monthly mortgage payments. But how much can you save?

Let’s say you take out a $300,000 home loan with a 30-year term and a base interest rate of 5 percent. Without any points, your monthly principal and interest would be $1,288.

If you pay one point, your interest rate will drop to 4.75 percent – and your mortgage payment will go down to $1,252. Your savings per month, then, will be $36. With two points and a rate of 4.5 percent, your amount due will fall to $1,216, which saves you $72 per month. In either case, you will break even in 84 months, or 7 years.

When Paying for Mortgage Discount Points Makes Sense

If you can afford to buy points, should you do so? The decision comes down to how long you plan to keep your current mortgage.

Paying for points only makes sense if you continue paying on your home loan until you break even, as after that time, you start to come out ahead. If, however, you refinance your mortgage or sell your home before then, you will end up losing money on the transaction.

To figure out what’s in your best interest, run the numbers. Or, speak with a mortgage expert, someone who can answer your questions about taking out a home loan.

If you live in Utah, turn to Integrity First Lending. Our free mortgage calculator makes it easy to see how discount points will affect your total monthly payment. And, our friendly team of highly experienced loan officers is always happy to offer advice and share their expertise.

Whether or not you pay for mortgage discount points, Integrity First Lending can help you find the ideal home loan solution. Contact our South Jordan or Tooele, Utah, office today.

When to Use a Broker Like Integrity First Lending

Why would you want to use a broker for your home loan? It would be easy to just run to your nearest bank or credit union. But this may not be the best way to get a loan that is created just for you.

Like everything else, there are good loans and bad loans. Lenders are really investors in your home. They want to make the most money for their investment, with the safest return. When giving a loan, they are more concerned with their own interest in the loan than you or your needs.

A mortgage broker is different. They are a personal loan shopper for your home loan. Because they are not the lender, there is no conflict of interest in getting you the loan that is looking out for you. Think of them as the glue that holds the process together without ripping at the edges.

It is the job of the broker to verify your financial information, run the numbers, and understand your needs. Then, they can go out and look at all of the options that you qualify for to find the best loan, at the best interest rate, with the lowest closing costs.

If you have special needs before qualifying for your loan, such as information on your credit report and repairs that you can make to improve it, they will be there for you. They can refer you to a specialist in credit repair, set up your private mortgage insurance, and so much more.

The brokers at Integrity First are not only knowledgeable about the loans that are currently on the market, but they have taken the time to specialize in specific types of loans. It is our mission to know the best interest rates for every type of loan. They will help you determine if an FHA loan or conventional loan is best. What if you are a veteran that is looking to own your first home? They’ll help you navigate a VA loan. They will help you get all of your paperwork in order, saving you time and frustration.

Getting a mortgage can be a very time-consuming process. When you let a broker do the heavy lifting and point you in the correct direction, you can save time and money navigating the mortgage process.

Save More Money When Getting an Investment Loan

Becoming an investor in real estate is a great way to make a “long term” profit in today’s real estate market. But getting a loan with current lending standards can be out of the reach of most investors. An investment property, one that you don’t live in but rent out, is a great way to build money for the future. If you’re looking for a short term quick flip, plan on having a large reserve of money to get started. At Integrity First Lending, we specialize in long term investment planning. We want you to succeed for years.

What does it take to get an investment mortgage in today’s tighter lending standards? The only type of loan you can qualify for in a home you don’t plan on living in is a conventional loan. Let’s look at the basic criteria for a conventional loan and the twist you need to make it an investment loan.

Credit Score

Credit scores have a high impact on any conventional loan, but when you’re looking at investing, the lender is going to look at whether you have the financial ability to maintain an investment property and your long term stability from past responsibilities. Before you start, take a look at your credit score and make sure it’s above 740. This may be the place you need to start to get the best loan on your first investment property. This is a great way to get a better interest rate on your investment loan. The better the credit score, the better the interest rate.

Finding a property with a great loan-to-value ratio is essential to saving money on your loan. It pays in the long run to have a property that is investment worthy.

Money

Since investing is all about making money, you should have an adequate amount to invest. Know up front the type of property you plan on investing in. If you invest in a single family home, you will be required to have at least 20% down. If you have more than the minimum amount, you can save money in the long run. The more down, the lower the end pay off, the lower the monthly mortgage amount.

Investment properties require at least 20% down on single family homes and 25% on multi-family homes. Since this is a basic requirement you also save money by avoiding (PMI) private mortgage insurance.

The Integrity Plan

The experts at Integrity First Lending want you to succeed in your investment plan, saving you the most money. We start your investment with a long-term business plan. Showing you how to make sure you have a back-up plan in case of an empty property, renovations that get the best return, and getting the best possible loan available. If you’re looking for a great property that can be occupied by you the borrower and have a rental attachment, we help you verify the rules and regulations for your house.

Give us a call today to learn more at 801.542.0961.

The Power of Being a First-Time Home Buyer

There is great power in being a first-time home buyer, even though you may not feel like it.

For starters, you have access to special loan programs that can help you close a loan more quickly and less expensively than if you had already purchased a home before.

In first-time mortgage loans, you can expect benefits like lower down payment requirements, subsidized interest, and caps to the fees that lenders can charge you.

first time home buyer

Lower Down Payments

First-time homebuyer loan programs often offer down payments as low as 0%-3% of the loan amount. Non-first-time loans can require a minimum down payment of up to 20%.

Subsidized Interest

If you are a lower income buyer, you may also have the government or some other organization subsidize the interest paid on your loan. That helps keep your monthly mortgage payment lower allowing you to better afford a home.

Private Mortgage Insurance (PMI)

Some of these programs could require you to pay for private mortgage insurance (or PMI) which adds to your costs while still making the home more affordable.

Using a Mortgage Broker

Getting with a reputable mortgage company to get you pre-approved will be your best bet to find a program tailored to your situation, saving you lots of time and money.

We’d love to help get you into your first home, paying as little as possible. Give us a call at 801.542.0961!

Make More Money With Your Real Estate Investment

You invest in real estate to make money. The best investments are those that make the greatest amount of money with the least amount of effort. So you want to put a value on the time you spend managing your investment as well as the money you put into it.

How do you make more with your investment? First you need to start with the best loan. One of the experts at Integrity First Lending can get you started with that.

real estate investment loan

Minimize Cost on Repairs

When starting your investment, make sure you get a great licensed home inspector to look for hidden issues with your property. Two things you may not know how to look for that will cost you in the end are mold and structural damage. The time it takes you to repair these problems is time you won’t have tenants in your home. Large amounts of money can be lost here.

Low Maintenance Yards

Consider landscape. When you buy a home you’re going to live in, you understand the work involved in keeping up a beautiful yard. Tenants may not have the same love for beauty as you do. However, when trying to find someone to occupy the residence, they may expect to see the property in perfect order. This is a two-edged sword that you don’t want to get caught up in. Keep yards and gardens to a minimum. Consider low maintenance yards when you’re looking for the perfect property.

Avoid Vacancies

When your investment is empty, you aren’t making money. In fact, you’re spending money on maintaining the loan. Every time a renter leaves the property you incur the cost of paint, possibly new carpet, etc. Keep turn over down to reduce the overall costs. This might mean higher deposits, or higher rents to get a higher quality of renter in your property.

Before you purchase a property, check out the neighborhood. Are you purchasing a home where you can get renters that can be proud to live there? If they’re comfortable in their new home, they will stay longer.

Check up on references before renting. Who better to know what kind of tenant you’re getting than a previous owner. It only takes a few moments of your time to save possibly thousands in repairs. Check out the length of time a prospective renter was in their previous location, and the reason why they left.

Extra Charges

Remember this is an investment property. You’re not here to make friends or cut corners. Renters expect to pay for extras. Make sure when you rent a property you protect your interest. Charge a damage deposit that is reflective of the type of property. If you’re renting a single family home with a yard, there is more to get damaged. Consider the current cost of repainting, repairs, and carpet.

First and last month’s rents are standard for most investment properties. Don’t undercut your safety net. A common item that is overlooked is pets. So many people are looking for pet-friendly rentals. The trick is getting a pet that isn’t going to attack and destroy. To motivate your new tenant and their four-legged friend, try charging a pet deposit and a monthly pet fee. This helps to minimize the overall damage, if there is any. If they leave the home free of damage be honest in giving a refund.

Professionals

When you make the decision to become a real estate investor, and you start with your first property, make sure you have the best team to get you started. You need a broker with expertise in real estate investing. You don’t want to settle for just any loan. Find a great home inspector. And find a great attorney to look over your documents. A lot of money can be saved when working with the right team of home loan professionals.

How to Reduce or Eliminate Mortgage Insurance

Whether you’re looking to refinance your current mortgage or you’re looking for a new loan, you need to know about private mortgage insurance (PMI) and how it affects you.

PMI is a privately secured insurance that is required on conventional loans with less than 20% equity in the property. This insurance protects the lender against any loss if the borrower defaults on the loan. A mortgage is just a large investment to the lender so they want to protect their interest in your home.

eliminate mortgage insurance

How PMI Works

When you start your loan, a private insurance agent will set up a policy that calculates 2% or more of your loan value that will be charged monthly as a part of your loan. So the higher the overall loan, the more you pay. This amount is based upon your current credit score and the overall down payment.

If you have an FHA secured loan, PMI is required throughout the life of your loan. FHA mortgages are loans that are given to lenders with less than perfect credit scores and lower down payment amounts. So it only makes sense that a PMI would be required.

Reducing and Eliminating PMI

There are multiple ways to reduce and eliminate your PMI. Considering the type of loan is your first start.  If you’re a veteran and you qualify for a VA loan, you’ll never be charged private mortgage insurance. You worked hard to protect your country, now your country wants to protect you.

FHA loans require PMI through the life of your loan. Because FHA loans are available to borrowers who have lower credit scores, and lower down payments, an FHA loan is their only option. But it’s these same factors that make them a higher risk to the lender. Requiring PMI is the lenders way of protecting their interest.

If you have an FHA loan that requires mortgage insurance, the best way to eliminate your insurance is to build your credit, build on equity, and refinance with a new conventional loan.

Conventional Loans

If you have a 20% down payment when you apply for your loan, PMI will not be required on your loan.

Although conventional mortgages may require PMI in the beginning, as you grow the equity in your home you grow closer to eliminating your mortgage insurance. It takes time to build up 20% equity in your home. In the beginning of your loan, more of your payment goes to interest than principle. By paying a bit more every month, you build up equity faster, shortening the length of time required before you can remove the required insurance.

When you hit the point of 20% equity and you qualify, there are two options to look at. If you are sure you have the best loan you can get, you can just request that your lender drop the PMI and lower your monthly payment. But if interest rates are lower, and loans are prime, you might want to consider this time to refinance your house. Contact a broker at Integrity First Lending and see if you qualify for a no closing cost mortgage.

5 Simple Ways to Get Higher Appraisals

Years of building up equity in your home can work in your favor. Before you get ready to call your broker and get your new home upgrade or refinance started, you want to get the most out of your equity. That means getting the best appraisal.

An appraiser is a third party that will give an unbiased opinion of your home’s current value. They are responsible for comparing your home to current marketing values, assessing the value against similar homes in your neighborhood, and the overall condition of your property.

An appraiser helps the lender determine the risk on your home. The lenders are looking for the best return on their investment when putting trust and value into your new mortgage.

higher house appraisal

Get the Outside Ready

Getting your home ready for an appraisal is like putting on your best dress and making sure you focus on your home’s best features.

Start with your home’s curb appeal. Is your front yard trimmed and appealing? This means more than just a mowed lawn. Gardens should be weeded and if possible add a touch of extra color to accentuate your home’s charm.

If you home is being appraised in the warm weather, adding floral planters on your front stoop adds an inviting element to the front of your home. Step back and ask yourself, would you want your family living and playing on this front lawn.

Although the front of your home is your first defense, your back yard should be trimmed and staged as well. Garages, out buildings and decks add value to your home. Make sure your decks are cleaned off and stained. Now is the time for you to do that weekend garage cleanout and have a big garage sale. You can remove all of the extras that you don’t use anymore.

Make the Inside Look Bigger

Once inside your home your appraiser will look at the obvious and the not so obvious. Is there functionality in the layout of your home? Although the layout of your home cannot be changed, the way you perceive flow in your home can be helpful in accentuating its function. Move furniture to open up space and improve walking areas.

Having a clean and organized home creates the perception of space. Put any extra items in your home away and show off its beauty. Don’t overdo the wall décor. This too can give the perception of clutter.

Make It Look New Again

If you want to get the best appraisal from your home, make it feel new again. You can do this by simply putting up a new coat of paint in each of the rooms of your home. Although you may think paint colors that are bright or unique are appealing. This may not be the case to a new buyer who may not have the same taste in color you do. Keep your paint colors neutral and pure.

Your carpets can make you home look older than it really is. Pay a professional to come in and clean your carpets giving them that brand new look. Do you have hardwood floors under your carpet? Consider taking the carpet up and giving your hardwood floors a new life.

When you look around your home consider the value of your windows. Putting new windows in your home can create great value in your home. This does not necessarily mean you need to replace your windows. Start with a good cleaning inside and out. Putting up simple and yet attractive window dressings can give your rooms a blast of color and class.

Point Out the Unique

Does your home have any unique points of interest? It’s these unique elements in your home that give value over the others on your street. Remember that your appraiser has to follow rules when doing an evaluation. Make your home stand above the rest and get a few more dollars added to your appraisal.

Get a New Appraiser

Although appraisers are now required to follow a stringent set of rules, it is still based on the opinion of one person. If you feel like your appraisal was low, get another one. There is no rule that says you can’t get a second opinion.

The amount of your refinance is dependent on it’s evaluation, so make sure your home is all dressed up and ready to go. Any amount of money you put into improving the look will come back to you in the end.

For great rates on refinance or other mortgages, contact Integrity First Lending. We make the home loan process easy!

5 Ways to Avoid Home Purchase Problems

Buying a home can be a complex process, and some homeowners find themselves with a mortgage that doesn’t work for them, or home repair problems that they can’t afford. A little work up-front can save you years of headaches and thousands of dollars.

Avoid home purchase problems

Check Your Credit Score First

Home buyers need at least a credit score of 620 to qualify for a loan. The higher your credit score the better the rate and terms of the loan. Some new buyers will not find their latest credit score, make an offer on a home, put earnest money down, and then try to qualify for a loan. If anything has changed your score to a lower number than what you were expecting, it could terminate the agreement, and you could lose all of the earnest money you deposited.

Get Pre-Approved for a Mortgage Before Shopping for a Home

Even if you know your credit score, lenders factor in many other financial variables that could raise or lower the amount they are willing to lend. The best way to know how much home you truly qualify for is to get pre-approved by the lender. Nothing can be worse than finding the perfect home only to find out later that you can’t qualify for it. A mortgage broker can shop for the best interest rate and terms that fit your situation. You can then shop confidently with your pre-approved amount.

Get a Home Inspection Before Purchasing

Sometimes, in an effort to get that home no matter what, first-time buyers may be tempted to not pay for an inspection. Structural and other necessary home repairs can dramatically increase your initial costs.

A home inspection is a must for all home buyers. Sellers should expect it.

An inspection should be done by a certified inspector who is trained to find problems with the foundation, the roof, plumbing, heating and air conditioning, electrical, and the presence of mold or pests. If any problems exist, you may get the seller to pay for them. If not, you will need to consider the costs and decide to move forward with the purchase or back out without penalty.

Negotiate on Home Price

It is best to work with an experienced and reputable real estate agent to help locate a home and negotiate on your behalf. A real estate agent will understand market trends, home values in the area, and how competitive other buyers are at the time.

In a highly competitive climate, you do not want to try to start with a low ball offer. If you really want the home, your first offer should be at the fair market value for the home. If for some reason your offer comes in too low, or negotiations go back and forth too long, the seller will often find a buyer with a better offer and you end up losing your home over a relatively small amount of money.

Whatever you or your real estate agent negotiates, get it in writing. Verbal agreements are not binding and you will most likely lose if it comes down to a legal battle.

Wait to Acquire New Debt Until the Deal is Done

Nothing will kill a home loan closing faster than a change to your credit situation. While your loan is processing, buying a new car on credit can be just as damaging as opening a new account at a local furniture store. Put off opening new credit accounts or making major purchases until after your loan closes and you have the keys to your new home.

If you can avoid these mistakes and keep learning all you can to help protect yourself, you will come out well and soon you will be living happily in your first home.

We’d love to help get you into your first home. Let’s get you pre-approved.

3 Ways You Save Big by Starting a Home Loan Application Now

Starting a home loan application means you are on your way to receiving your pre-approval letter. That letter will let you know exactly how much you can borrow. That knowledge will help you save time and money as you search and make an offer on a home.

Start a home loan application

Get a jump on fixing any financial issues

Going through the application process will help identify any financial issues that need to be addressed. Things like credit score, debt-to-income ratio, work history, and more are reviewed by the lender. If any issues need addressing, this gives you an opportunity to do that to make sure you qualify.

Save money by positioning for a better rate

You won’t get a true rate for your situation until you apply for a home loan. The information given in your application allows a mortgage broker to shop around for the best terms and rates that fit your situation.

If a financial issue may take time to correct, you may want to consider correcting that issue and re-applying at a later time to qualify for a better rate or higher mortgage amount. In the long run you could save thousands of dollars.

Save time by speeding the time to closing

When all issues are resolved and you have a pre-approval letter in hand, that document will help make you and your offer more attractive to the seller of the home, oftentimes putting your offer ahead of others. The seller will see an serious buyer, an approved funding amount, and will imagine a much smoother and faster closing process. Your negotiations will be taken more seriously and you can find yourself saving time and money in many areas.

Your mortgage broker can help you get a pre-approval letter by having you complete a loan application. You can go to IntegrityLending.com and start the application process online.
We’d love to help get you into your first home, approved and saving money.

Get Your Pre-Approval Letter by Starting Your Application.

Start Your Application Now