Understanding just how a reverse mortgage works is one of the most important aspects to deciding whether or not it’s right for you. So without further ado, here’s what you should know about a reverse mortgage. 

What is a Reverse Mortgage?

A reverse mortgage is essentially exactly what it sounds like. By definition, a reverse mortgage is a type of loan in which the lender actually pays you on the equity of your property, rather than you paying the lender. It’s tax-free income, however, it’s only for those who are 62 and older. Additionally, while the owner does not pay monthly, this loan must be paid back in full before moving out, before the borrower dies, or sells the home altogether.

In addition to these stipulations, there are other factors to consider when it comes to the principle limit, those standards being: 

1. The age of the youngest borrower
2. Current interest rates
3. And the HECM mortgage limit
4. The home’s value

The older you are, the higher the principal limit. Higher property value? Higher limit. These are things that should be reviewed before considering a reverse mortgage.

Furthermore, a reverse mortgage offers many benefits. Read more below.

Top 5 Reasons You’ll Want to Choose a Reverse Mortgage

1. Budget Space and Relaxation – Once you’re retired it’s most likely that you’re living on a fixed income. With a reverse mortgage, you can give yourself a bit of wiggle room, ensuring that your bills are covered while also freeing up some of your monthly income.
2. Home Improvements – Ensuring that your home remains a functional space for you to live in is of the utmost importance but it may require some upgrades and renovations. These can be somewhat costly and with a reverse mortgage, you can make the necessary changes to your home without worrying about where the money is going to come from. 
3. Fund Long-Term Care – In our older age we may see higher medical costs and the need for an in-home care provider becomes ever-present. Sometimes, this can be more affordable than moving to an assisted living facility but still can require quite a bit more funds. This is one great reason to consider a reverse mortgage. 
4. Debt Consolidation – Using your reverse mortgage allows you to get out from other types of loans that may have much higher interest rates. Consolidating this debt can help with monthly costs immensely. 
5. Enhance Your Life – It’s important to make sure that you’re enjoying your retirement and giving yourself more funds to work with every month leaves you with more money to use on leisurely activities such as spa days or vacations. Life enjoyment is just as important as handling financial aspects of your life. 

When it comes to reverse home mortgages we know there’s a lot to consider, in fact, we didn’t even cover all of the stipulations of them here. Not to worry, the professionals here are Calstar Mortgage are here to help you navigate the world of reverse mortgages, as well as many other types of loans as well.

Don’t hesitate to get started by speaking with one of our experts! Click here or give us a call at (818) 952-2815 or (818) 952-2701!

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Fixed-Rate Mortgages

If you choose a fixed-rate mortgage, you will pay the same amount in interest each month for the entirety of your loan. Fixed rate-mortgages are preferred by homeowners looking for long-term financial security and stability. They allow the homeowner to make long-term financial plans without fear that their mortgage payments will change in the near future. For some, this sort of security is important in creating and maintaining a stable budget. Fixed-rate mortgages are a great option for first-time homeowners as they adjust to homeownership. Typically, they have terms ranging from 10-30 years.

One of the downsides of fixed-rate mortgages is that when compared with an adjustable-rate mortgage, they may have higher initial rates. If the mortgage market improves, you will need to refinance your mortgage to take advantage of improved rates, which will mean additional closing costs and expenses.

Adjustable-Rate Mortgages

Adjustable-rate mortgages (ARMs) have an interest rate, and subsequently a mortgage payment, that fluctuates based on market conditions. They can have a fixed interest rate for a portion of the mortgage term before switching to an adjustable-rate change on a regular basis. ARMs tend to be a bit more complex than fixed-rate mortgages with their recurring changes. They’re less predictable from a budgeting perspective than fixed-rate mortgages, which can affect borrowers in different ways.

Common ARM term options are 5/1, 7/1, and 10/1. What this means is that there is either a 5, 7, or 10 year fixed-rate period following by adjustments every 1 year thereafter. If interest rates improve this can be advantageous. The interest rate is determined based on the index, an economic indicator that determines how it increases or decreases. There is a cap on how much an ARM interest rate can rise during each adjustment period and a lifetime cap on how much it can increase over the life of the loan, which can protect clients from life-changing increases in rates.

As mentioned earlier, ARMs tend to start at lower interest rates that fixed-rate mortgages. Homeowners looking to relocate or refinance relatively soon after their purchase, ARMs may be the best choice.

Get Started Today

To more about fixed and adjustable rates for mortgages from CalStar Mortgage Inc.  in La Cañada Flintridge, CA, contact us today to schedule a consultation. We are here to help further explain the advantages of each rate type and help you choose the one that best fits your financial goals.

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USDA and FHA Loan Basics

When you compare USDA vs. FHA loans, you’ll find there are pros and cons to both options; however, one may be better suited to your unique needs. Each has different qualifying requirements and benefits to consider.

USDA loans are insured by the U.S. Department of Agriculture. The USDA actually provides several different loan and grant programs for rural development, but the one we’ll be discussing this week is known as the Single Family Housing Guaranteed Loan Program. These loans make it possible for low- and moderate-income borrowers afford safe, modest housing in certain USDA-designated rural and suburban areas.

FHA-guaranteed loans were first created to help struggling families afford safe, affordable housing as well. They’re the most popular type of nonconventional home financing because of their relaxed approval requirements and low down payment requirements. First time home-buyers often favor FHA loans over the many other options available.

What’s Different?

There are a few key differences to consider when it comes to USDA vs. FHA loans:

• FHA-backed loans have no maximum income limitations, while USDA loans are only available to people who make up to 115% of the adjusted median income (AMI) in a given area.
• The FHA sets maximum loan limits, while the USDA does not. The FHA loan limits in La Cañada Flintridge, CA range from $ 726,525 for a single-unit home to $ 1,397,400 for a four-unit home. It’s important to note that, while the USDA doesn’t set a loan maximum, applicants must show proof of income and will only get approved for loans they can afford.
• USDA loans provide 100% financing, which means 0% down payment for eligible applicants. FHA loans, however, have 3.5% down payment requirement with a 500-579 credit score or a 10% down payment requirement with a 580 or higher score.
• When it comes to mortgage insurance, both government-backed loans require monthly mortgage insurance premium payments. USDA vs. FHA Loans: What’s Similar?

If you choose a USDA or FHA loan, the home you purchase must be used as your primary residence. This means neither is a good option for a vacation or second home. Both loans are only available to qualifying U.S. citizens, non-citizen nationals and Qualified Aliens. Lastly, both nonconventional loans are funded by government-approved private lenders, who ultimately will determine which applicants are approved.

What Matters is What’s Right for You

Interested in learning more about these great nonconventional loan solutions? The team at Calstar Mortgage Inc. would love to help you explore your options. We offer prequalification to determine if you’re eligible and can give you a free quote, so you can compare loans. If you plan to purchase in La Cañada Flintridge, CA, contact us to talk about USDA vs. FHA loans today.

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How Does Mortgage Insurance Work?

Mortgage insurance is standard with many types of home loans and can be required on others if certain requirements are not met by the homebuyer. This type of insurance is typically requested if you do not have much money for a down payment. It helps lower the risk for the lender making the loan, and it helps you qualify for a mortgage that you otherwise may not be able to get. If you have less than twenty percent down payment for the home, then you may need mortgage insurance. Premiums can be rolled into your monthly payments, closing costs, or both. Various types of mortgage programs also come with their own type of insurance requirements and options.

Mortgage Insurance and Various Loan Programs

Depending on the type of home loan you are looking for, mortgage insurance may be mandatory. In some cases, it may not be needed at all. Here are some common loan types and their mortgage insurance requirements.

-FHA Loans: If you get an FHA Loan (Federal Housing Administration Loan) then you will be required to have mortgage insurance from the FHA. You will need to pay an up-front premium as well as a monthly premium. Costs for this type of insurance will generally be consistent and predictable, unless you have a very low down payment.

-Conventional Loans: If you get a conventional loan, then the lenders might request private mortgage insurance. With this, the rates can be dependent on your credit score. You may also be able to cancel the insurance down the line after you have built sufficient equity in the home.

– VA Loans: One of the advantages of the VA Loan (Department of Veterans’ Affairs VA-backed loan is that you are not required to pay mortgage insurance. You may need to pay other fees that will be tacked into your monthly mortgage payment.

We hope this was helpful in answering some of your questions regarding mortgage insurance. If you want to learn more or have any questions, contact Calstar Mortgage Inc. in La Cañada Flintridge today!

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Understand and Monitor Your Credit

The first step in rebuilding your credit is to understand it and carefully monitor it Thankfully today, there are several free websites that allow you to check your credit scores from the three major credit bureaus – Equifax, Experian, and TransUnion – as often as you like. Many credit card companies, too, allow you to see at least one of these scores. Credit scores are populated from several different factors, some of which are weighted more than others. From most to least important, they are: payment history, credit usage, length of credit history, types and number of credit cards and loans, and number of credit inquiries. Once you understand these different factors, you can begin to monitor how different changes affect your score and act to improve any areas of weakness. Keeping careful track of your score will also help you catch any giant changes in your credit that may be a sign of an error on your report or malicious activity.

Pay Down Debt in a Focused Way

Another important way to rebuild credit after a financial misstep such as bankruptcy or foreclosure is to focus on paying down debt. This may seem like an obvious tip, but it’s one of the most important. It is essential that you do not miss any payments on any open credit cards or other loans. If you have several accounts with debt, focus on paying off one account at a time (while still making at least the minimum payment on each card), starting with the account with the highest interest rate.

Keep Your Credit Accounts Open

Once you have paid off a credit account, you don’t necessarily want to close the account. Since credit usage is one of the factors that affects your score, keeping open an account with a high limit – and no balance – helps lower the ratio of how much credit you’re using versus how much your limits are.

Get a Secured Account or Co-Signer

If you do not have any open credit cards, possibly due to them being closed after bankruptcy, you may want to get a secured credit card to help rebuild your score. Secured cards require that you deposit money up front as collateral. It’s very important that if you do open a new secured card that you pay it off each month entirely. There’s also something known as a credit-builder loan, which you may be able to get from a credit union or local bank. Another option is to get a co-signer on a credit card or loan, who can help you get approved for a loan that you may not be eligible for on your own.

Small Steps Make a Big Difference

Rebuilding credit takes time, but with focus, determination, and a few right moves, you can begin to raise your score to get qualified for a mortgage or any other financial goal. When you’re ready to learn more about how to rebuild credit, there are many resources available to you. There are several free credit counseling services that you can research online. We also invite you to contact our team at CalStar Mortgage Inc., where we can provide some additional insight about your individual situation. We’re located in La Cañada Flintridge, CA, and we’d love to hear from you.

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We don’t expect that our clients will be able to catch every potential problem, even armed with a checklist. You can use these as jumping off points to discuss with the seller and real estate agent. This is not a comprehensive list; please visit our blog in the future for more tips on what to look for when buying a home. You should enlist also the services of an inspector, but that doesn’t replace the need for you to personally inspect the house, as well.

Evaluate the Structure

A house is nothing without a solid foundation. One of the first things to look for when buying a home is the structural aspects of a property. That means the literal foundation of the home, as well as the floors, walls, and roof. Look past any paint jobs or flooring that may be disguising cracks, water damage, or any areas that look unstable or uneven.

Consider the Whole Property

In addition to looking at the actual structure of a prospective home, consider the lot on which it rests, too. Consider any renovations you might want to make, how much time (or money) gardening will take, and more serious concerns like if the area is prone to wildfires or flooding.

Check the Plumbing

When the plumbing in a home works as it should, you rarely consider it. When you’re looking at houses that you might want to live in, take time to ask about and look at the plumbing. Use your eyes to check everywhere for any signs of water damage or mold. Ask about when the pipes, water heater and other equipment were installed.

Ask About Insulation

Insulation not only helps maintain a comfortable temperature in your home, it also saves you big time on heating and cooling bills. Of course, you can’t rip open the walls to check insulation, but you can ask what type of insulation is installed and when. Ask to look in the attic, if possible, and look in any unfinished areas where you can look with your eyes.

Look at the Details

Turn on every light switch and every faucet, look in every nook and cranny, and ask questions at every step when you walk through a home. It’s easy to get caught up in the general vibe of a room, but it is important to look shrewdly at every detail. This is a great way not only to identify any potential problems (like an electrical issue), but also to make sure a home checks your short list. Even if you love a room, be sure to note if, for example, it has no storage space and remember that when considering you and your family’s needs.

Don’t Get Discouraged

It may feel like a lot of weight on your shoulders to meticulously inspect each home you visit but remember: This is a house that will become your home for a long time. It’s important that you not only get a great feeling when you view it, but also that you remember these things to look for when buying a home.  Contact CalStar Mortgage Inc. in La Cañada Flintridge if and when you have more questions and to get preapproved, so you can view homes only in your price range.

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What is a Realtor?

Before you can find a Realtor, sometimes stylized REALTOR, it’s important that you understand exactly what that title means. A Realtor is a specially certified real estate agent who is a member of the National Association of REALTORS, which has standards and certain codes of ethics. Real estate agent and real estate salesperson are other names for people with real estate licenses who are not part of the National Association of REALTORS. A real estate broker is an agent who has taken additional courses beyond the agent level and passed a broker’s license exam. Brokers often hire agents to work for and with them. Both real estate agents and brokers can be Realtors.

Why Choose a Realtor?

Because of their membership in the National Association of REALTORS, you can trust that Realtors have not been in any serious problems in their profession in the past. Realtors promise to abide by a strict code of ethics focused on honesty. Realtors are experienced with the dozens of forms and other documentation involved in making an offer for a home and closing on it, which means these processes go smoother for you. They are also skilled negotiators who can help you get a great price on a home.  They can also provide further information about the local area, with information about utilities, schools, and other basic information about the areas where you’re considering buying.

How to Choose a Realtor?

Any good Realtor will be happy to show you documentation of his or her training and membership in the Realtor association, so be sure to ask for these up front. You should ask how long your agent or broker has been practicing and ask how many homes he or she has helped closed in the past year. It’s important that your Realtor has recent experience and is familiar with the current state of local real estate landscape.

Ask your Realtor how many clients he or she has now. Not only do you want your agent to dedicate time to you while you’re out actually looking at homes, but also to have the time to spend behind the scenes working to find a home you’ll love. Some agents work as part of a team, which can be good or bad depending on how much attention you’ll receive, and how intimately each team member will understand your situation.

Ask if he or she works with primarily buyers, sellers, or both. While you want your Realtor to have experience with buyers (since you’re a buyer), it can’t hurt if he or she also has had experience selling homes in the past, which gives a new sense of perspective in the process.

In addition to talking to your Realtor, you can also ask to talk to his or her former clients. Most brokers and agents will have a readily accessible list of happy clients who will give you an honest opinion about their homebuying experience.

How to Get Started?

Call us! The lending professionals at CalStar Mortgage Inc. are so much more than mortgage brokers. We would love to help you in choosing a Realtor as well as finding a home loan with an amazing rate and great terms. Contact us in La Cañada Flintridge, CA, today.

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Evaluate Your Finances with a Mortgage Professional

Before you can begin to look for homes, you’ll need to know how much house you can afford. This means you’ll need to carefully evaluate your current finances and savings and make some projections for how much you will be able to afford in the future. A mortgage professional, sometimes known as a mortgage agent or broker, can help with this process. Mortgage professionals represent several different lenders to offer competitive interest rates and terms to meet different clients’ needs. Your mortgage professional will look at your credit score, your savings, your employment history and other factors that affect your worthiness as a borrower.

Find Out How Much You Can Borrow

Once your broker has a better picture of your finances, you should be able to get preapproved or prequalified for a mortgage. Prequalification requires minimal paperwork and will give you and your real estate agent a price range to stay within while looking for a home, while preapproval is a quote for a specific loan amount that requires more documentation like paycheck stubs, W-2s, and credit scores.

Find a Real Estate Agent and a Home

You can begin to look for a real estate agent on your own or your mortgage professional may recommend one in the local area. Once you’ve determined how large of a loan you are eligible for, your agent will show you homes in your price range and meeting your requirements in the local area. Once you find a home you love, you’ll coordinate with your real estate agent and mortgage professional to start the process of making an offer.

Make an Offer and Complete Inspections

When you make an offer, your real estate agent will communicate with whoever is representing the seller and negotiate for you. If the seller accepts your offer, the home will go into escrow – which is the first step in finalizing the sale.

Once you’re in escrow, you’ll get a home inspection on the property you’ve chosen. Typically, the offer you’ve already made is contingent on this inspection. This means if anything comes up during inspection that may require money out of pocket to repair, you can ask the seller to make the repairs or adjust your offer accordingly to mitigate the cost.

Appraisal and Closing

Before your lender will finalize your loan and coordinate paperwork, you’ll also need to get an appraisal on your new home. This appraisal shows you, your lender and the seller that you’re paying a fair price for the home. Once appraisal is complete, your mortgage broker will begin preparing your closing paperwork for your loan. When your loan is finalized, your lender will pay the seller for your home, and the home is yours.

Get Started with Us Today

This is just a basic introduction to steps in the homebuying process, and every transaction is unique. Make sure to contact CalStar Mortgage Inc., in La Cañada Flintridge, CA, when you’re ready to take the first step on the journey to buy the home of your dreams.

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Prequalification

Prequalification is a simple and fast estimate that a mortgage lender makes to a potential borrower. It’s not a contract and not an official document. However, it can be a great way for clients to get a good feel for what rates and terms they might be able to secure with different lenders. Prequalification can be done over the phone. In most cases, clients don’t have to submit credit card statements or other documents to prove your income. However, you will give your lender information about your financial status. The more honest you are about your finances with your mortgage agent and private lenders, the more realistic your prequalification quote will be.

Preapproval

Preapproval is a more involved and official estimate lenders provide to certain borrowers. With preapproval, lenders provide a conditional commitment in writing for a specific loan amount to a borrower. Because it’s official, applicants will need to provide a larger number of documents, including a copy of a credit rating, documents showing your payment history and various bank accounts, as well as W2s and pay stubs to document your employment history and income. Basically, all the documents you must provide to officially apply for and finalize a mortgage.

Getting preapproval or prequalification is great not only because it gives you and your real estate agent guidelines for how much home you can afford. It can also give some sellers more confidence that you are serious about purchasing a home, which may put you at an advantage when compared with other buyers.

Getting Started

If you’re interested in learning more about mortgage preapproval vs. mortgage prequalification, the CalStar Mortgage Inc. professionals are here to answer your questions. If you’d like to get preapproval or prequalification, contact us today. We have long-term experience in the local area in La Cañada Flintridge, some of the most competitive interest rates from top lenders, and we offer preapproval and prequalification.

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Conventional Loans

There are two main types of mortgages: conventional and nonconventional. Conventional loans are fully funded and insured through private lenders – that is, they are not insured or funded by government agencies in any way. Conventional loans have competitive interest rates and a full range of terms (length of the repayment plan), so they’re adaptable to different buyers’ needs. Private lenders have different eligibility requirements to determine who is and is not approved for each loan, and these requirements are typically harsher than those of nonconventional loans, which we’ll discuss shortly. To get approved for a conventional loan, you will need to have good or better credit, proof of stable income for the past few years, and a substantial down payment – usually of at least 5-20%. The higher the loan, the stricter the approval requirements and down payment requirement.

There are two types of conventional loans: conforming and nonconforming. Conforming conventional loans are “conform” to limits set forth by Fannie Mae and Freddie Mac, which purchase mortgages in bulk from private lenders. Fannie Mae and Freddie Mac repackage loans for sale on the public market, and they’re only willing to take a certain amount of risk. This means they only purchase loans up to a certain limit, which varies by county. In Los Angeles County, that limit varies from $679,650 for a one-unit home to $1,307,175 for a four-unit home. If the home you wish to purchase exceeds the conforming loan limit, you’ll need a nonconforming loan, sometimes also known as a jumbo loan. Jumbo loans have more strict approval requirements and a larger down payment requirement.

Nonconventional Loans

Nonconventional loans are a popular type of financing among borrowers with less-than-great credit or who cannot raise the funds for a substantial down payment. Nonconventional loans are backed by various government agencies, like the Federal Housing Administration, U.S. Department of Agriculture, and the Department of Veterans Affairs. They have low down payment requirements (ranging from 0-10%) and are available to borrowers with credit scores as low as 500. Nonconventional loans are fully funded by lenders, which are approved by each agency. Some have income limits and are only available for homes purchased in certain areas. Nonconventional loans often have higher interest rates than conventional loans, and in may cases, mortgage insurance must be paid for the life of the loan. While they may cost more than conventional loans over time, nonconventional loans are a great option to consider if you may not qualify for conventional financing.

Get Started Today

When you’re ready to learn more about the different types of home loans, contact CalStar Mortgage Inc. Our lending professionals have the local experience in La Cañada, Flintridge, CA, and we’re here to find a home financing solution for you. We offer free quotes and are happy to answer your questions, so reach out today.

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