A Guide for Consumer Choice in Your Next Mortgage

Sub-Prime Lending: Be Wimpy

Posted by Joel Asbury on Tue, Sep 10, 2013 @ 05:24 PM

mortgage app, application

If you are even remotely contemplating an application for a mortgage, you need to think about how your monthly bills stack up. Are you paying too much in extraneous debt such as credit cards, automobile loans, or equity lines on your current home? Do you have a second mortgage with an interest rate that is sky high so all you can afford to pay is the minimum interest payment? That is scary. In today's market, it is easy to find yourself underwater on your mortgage. Let me walk you through some of the steps you can take to avoid over extending your credit.

Take a look at this article posted on the Fannie Mae website. Dave Ramsey is renowned for counseling people who need credit help. Fannie Mae is a Government Securities Agency (GSA) that sells loans on the secondary market to investors. The purpose of Fannie Mae and Freddie Mac (the other most popular GSA) is to buy mortgages and sell them as securities in the public securities market. When they are inundated with sub-prime mortgages, our markets can become unstable and lead to the situation we had in 2008 that brought down our economy. It only takes a few weeks to go through Ramsey's program, but it will save you a lifetime of credit woes. Now take a look below at an example I came up with based on what Ramsey and other financial guru's might tell you.

The first thing you should consider when either purchasing a new home or refinancing your current is where is all of your money per month going once you receive it? Is it being saved at least 10%? Is it being given to charity at least 10%? Can you comfortably live on the 80% you have left? Now, this formula is typically what a financial planner or religious leader may tell you in a sermon about finances. Honestly, it works. If you are unsure how it does, let me spell out the actual figures for you:

1. Say you make $4000 per month

2. That is a comfortable $48,000 per year in just gross earnings

3. Ten percent of that is $4800 - you won't ever see it until you need it if you use automatic deposit features your bank or employer offer

4. Ten more percent is another $4800 to support your local charities - you WILL see that as a tax write off on your IRS Personal 1040s. This is a bonus you didn't think about, huh?

5. $38,400 is what you are left with in actual cash on hand (in a non-income taxed world) - now all of a sudden $43,200 is what your taxable earnings are before factoring in other write offs such as exemptions and maybe even some self-employment income for jobs you do on the side to supplement your yearly income... chances are pretty good now that you will get a refund from Uncle Sam that you can save for later or pay down some of your bad debts

So what do all of these figures mean? Simple - if you have $38,400 left per year after saving and doing your charitable justice to humankind, you can live pretty comfortably if your debts are minimal. (Obviously, if you are married and your spouse brings in more bacon than you do, just add his/her income to yours and work out your formula to find your personal number, but you get the picture here). Controlling your debts is what it takes to maintain financial stability.

In a world that is full of desires for things that cost money - cars, homes, designer clothes, jewerly - you can rack up a large credit debt bill. Even if you live responsibly and within your means, credit card debt can be a huge temptation to make like Wimpy from the classic Popeye cartoon series and "gladly pay you Tuesday for a hamburger today." We need to break that statement down in the next paragraph to see what that means exactly... so here we go!

Credit is something that you should use sparingly and only in times when cash just isn't the best option. For instance, if you are buying gas for your car - most gas stations now require prepayment - you can get up $100.00 per pump transaction per visit to a station. With rising prices, I hope you have a small tank! I don't know about you, but I don't carry that kind of cash with me at all times. Use a credit card, but watch your limit and alternate cards if you have more than one. If you have one with a higher limit, use it the most. But here's the kicker, you have to pay the hamburger man TUESDAY with CASH from YOUR income stream if you buy a hamburger today. Don't wait until Wednesday, Thursday, or Friday. If you don't immediately pay back the credit you used, your credit score suffers. But here's another kicker, keeping balances at 30% of your limit or less is actually better than paying it off completely. Funny how the credit algorithm works...

Now, after Wimpy pays the man for his hamburger, what does he do next? Easy - he gets another one. But this time, he pays cash because it is after pay day. Do you see where this is going? Wimpy has cash to spend. He's not on credit because he doesn't need it. Never use credit unless you absolutely need to. This is where many people run into trouble. "But what about people who have no income and are just trying to live?" I'll answer that question next.

If you have experienced credit shock and (hopefully) avoided bankruptcy in the past, don't be turned away. It may still be possible for you to obtain a credit consolidation loan. If you have late payments because you lost your job, or you had to obtain a few extra credit lines to make ends meat - you're not alone. This happens in times of poor economy, and when mortgage rates increase, these types of borrowers emerge as primary customers. They are known as sub-prime borrowers because their credit is just that - sub-prime - or sub-par for you golfers out there (but in this case, below par isn't good)! We want to work with you to provide a means for getting out of the sub-prime market and into the prime market. It may take some counseling or patience - or both - but it can be done. But obviously, you have to be gainfully employed for this to even be considered.

So remember this guy -

wimpy, tuesday hamburger

... and pay up on time!

As always, tell us your thoughts in the comments below. I'd love to hear them. I want you to be as informed as you can be, especially if your credit history isn't that great. Loans are there for you to consolidate debt, but you may have to do some work first to get one. We all want to own our own homes, and cash really isn't an option for all of us. So... here's a great example of when to use credit! Click the button below if you're ready to talk to one of us about this topic directly...

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Topics: bill reduction plan, refinancing tips, financial responsibility

Winterwood Mortgage's Debt Consolidation Summer Program

Posted by Joel Asbury on Wed, Jul 17, 2013 @ 05:36 PM

Mortgage Calculator, finance questions, buy a home
When the weather warms up, new home buyers go out shopping for what they hope is the home of their dreams. Older families that are experiencing unexpected (or expected) growth revisit moving into a larger home to accommodate the changes because their other kids are out of school. Younger families that are just beginning to take shape are experiencing a higher proportion of decisions to actions because these families are entering new beginnings. After all, they just want to build the right foundation for their family (no pun intended - seriously).

Summer in Indiana means families are on the move. This subsequently means Winterwood Mortgage is hard at work making sure these families are well equipped to. As for us now? Here we are, past the pivotal halfway point of the year where we all take inventory of what the last half of the year can provide. Does that mean a new beginning? Does that mean rediscovering financial responsiblity by lowering my monthly bills? Does that mean getting the kids prepared for another successful year at school sooner than ever before?

We want you to succeed at whatever endeavor your family is undertaking. Currently, I know of several families we are assisting in lowering their monthly bills while using the equity in their homes to pay off extraneuous debt. Some of these families are going through personal hardships that required swift financial decisions to pay for medical expenses, losses from weather related incidents, or just too many credit lines against their income. That's where Winterwood comes into play.

By offering debt consolidation through FHA, VA, or Conventional loan programs, Winterwood Mortgage Group has what it takes to safely and effectively consolidate your monthly bills while maintaining a level of comfort for you and your family. Many people overlook the possibility of how their homes can work for them. For instance, a Reverse Mortgage Loan can be an effective tool for Seniors aged 62 and over. By converting (the "C" in Home Equity Conversion Mortgage - the industry term) their equity into quick cash, Seniors can use that money any way they need to. All other refinance programs work well for those under the age of 62, as well.

By taking a cash-out refinance, the money available to you can be as simple as how much you have paid into the principle balance on your home. I have recently completed a transaction on a primary property where the borrower took out as much equity as the appraisal would allow for, and then turned around to consolidate his bills - including a refinance on his investment property!

These are all examples of how Winterwood Mortgage Group provides financial programs designed to assist you. No matter what stage of life, no matter what season of the year - you can count on Winterwood to be there to serve you.

For questions, comments, or concerns, please submit them below by clicking on the orange button or leaving a comment. We want to get started today before interest rates get any higher. Hurry. There are no guarantees what the markets are going to do. We're waiting for you.

 

 

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Topics: home financing tips, mortgage tips, bill reduction plan, refinancing tips, reverse mortgage

How a Low-Interest Mortgage in 2013 May Be a Right Fit for You

Posted by Joel Asbury on Wed, Jan 16, 2013 @ 05:15 PM

debt consolidation;fixed rate mortgage

Have you found yourself needing to consolidate bills? Or do you need a savings plan for college, retirement, or other unforeseen expenses?

Right now has never been a better time to consolidate your monthly mortgage payment to a lower interest rate. A low-interest mortgage can severely affect your ability to save for the future.

For instance, if you visit our mortgage calculator page, you can track your own personal savings potential. An example is recorded below:

Initial Mortgage of: $100,000

20% Equity: - $20,000

Total remaining mortgage: $80,000

Term: 360 Months (30 Years)

Current Interest Rate: 5%

Principal and Interest Payment - $429

Now if you reduce your interest percentage to today's rates:

New potential interest rate: 3.5%

New potential APR: 3.718%

New Principal and Interest Pament - $359

A $70 reduction in principal and interest payment per month can add up to a savings of $840 per year. That amount of savings can be reinvested in other areas such as your 401(k) plan, or your IRA, or even a 529 savings plan for college. Obviously, taxes and insurance on the property will define your final savings, but this is still a worthwhile endeavor nonetheless.

Imagine if your son or daughter is 6 years old and just beginning elementary school this year. Twelve years of saving $840 per year is $10,080 by the time he/she is 18 - plus earned interest. Depending on the interest rate in your plan, that is a good chunk of change!

With college being so expensive these days, it makes sense to consolidate your bills as soon as you can. Granted, $10(k) is not a huge amount, but that's $10(k) you otherwise would be paying in interest on your home!

Now I know you may be asking, "ok, so what are the fees?" Fees to achieve this goal are generaly below $1000. Your total savings in your first year will cover the cost of refinancing your current mortgage in many cases. Plus, at Winterwood Mortgage, we can offer programs that help you save on your origination charges. Just ask any of our sales team members if you qualify.

For inquries, please click the following icon and a representative will be in contact with you!

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Topics: home financing tips, college savings, bill reduction plan, 529 savings

About Our Authors

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Tony Gregory regularly contributes to this blog. He is an experienced loan officer in both residential and commercial lending from a commercial banking background. He participates daily in the economic and political activities that continue to shape this industry. You can email him directly at:

tonylends1960@gmail.com

Joel Asbury is Sr. Vice President of Compliance Operations for Winterwood Mortgage Group, LLC as well as a licensed Loan Officer. He regularly consults potential clients for the Sales Team while maintaining relationships with former ones via multiple marketing channels as well as developing new business through new lending channels. You can contact him directly:

jasbury@winterwood.net

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Linda Begley regularly contributes to this blog as a Reverse Mortgage Commentator. She has been a teacher in the Public School and Private School sectors, but then after retirement decided she could no longer take not being able to teach! It is her life passion to educate, which she carries on with her Reverse Mortgage seminars for not only the Public Sector, but the Financial Planning and Accounting business sectors as well. Linda has recently rejoined Approved Mortgage A Winterwood Mortgage Group as a Reverse Mortgage Consultant. Email her today at:

lbegley@approvedmortgage.com

We will do everything we can to help you succeed in your next home mortgage endeavor.

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