Here’s a tour of our United Home Loans office in Western Springs, Illinois. UHL opened it’s doors in 2002. I feel both blessed and proud to be a part of the company for 21 of those 23 years. We continue to grow, now with offices in Chicago and Nashville. If you’re ever out in the burbs, feel free to stop by and say hi!
Renovation loans can be a game-changer, when inventory is low or home prices for turnkey homes just aren’t affordable.
Ever wonder what lenders look at? How much a single inquiries impact your scores? Just want some tips to keep your credit profile as clean as possible?
C.F.P.B information on mortgage lenders pulling reports: https://www.consumerfinance.gov/ask-c…
Free Annual Credit Report: https://www.annualcreditreport.com/
Rate! Rate! Rate! So, you want the lowest interest rate? We get it.
Interest rates are determined by how mortgage backed securities are sold and traded on Wall Street. When the market is volatile, so are interest rates. While it’s my job as a mortgage banker to monitor the market and advise you on when to lock in your rate, when to refinance or suggest options that best fit your financial goals as a homeowner, it’s important to know that there are other ways to reduce the interest you pay on your loan other than simply lowering your interest rate.
Whether you’ve recently purchased a home or have considered refinancing, you should evaluate your mortgage and implement ways to save money. Let’s look at three methods to reducing the overall interest you pay on your loan.
OPTION 1: Shorten the Loan Term
Here’s some food for thought:
A person will pay more interest over the life of their loan on a 30 Year Fixed at 4.125% than they would if they chose a 15 Year Fixed at 8.000%!
It sounds like a no-brainer. If you pay off your loan in a shorter amount of time, you are going to pay less interest. However, it’s important to understand how an amortization schedule works. Even though your monthly principal & interest payment on a fixed rate mortgage never changes from month-to-month, the principal and interest amounts do. Every monthly you make a payment, your loan balance goes down, so, the interest you are paying on the loan balance also goes down. The principal goes up, keeping your payment the same. Here’s how the principal & interest break down at various points of the loan term for a $300,000 loan at 4.000%.
| 30 Year Fixed | 1st Payment | 60th Payment | 120th Payment | Final Payment |
| Principal | $432.25 | $526.02 | $642.27 | $1,424.70 |
| Interest | $1,000.00 | $906.23 | $789.98 | $4.75 |
| Total Payment | $1,432.25 | $1,432.25 | $1,432.25 | $1,429.45 |
Notice how much quicker the interest drops by paying more principal monthly on the 15 Year Fixed.
| 15 Year Fixed | 1st Payment | 60th Payment | 120th Payment | Final Payment |
| Principal | $1,219.06 | $1,483.52 | $1,811.38 | $2,212.62 |
| Interest | $1,000.00 | $735.54 | $407.68 | $7.38 |
| Total Payment | $2,219.06 | $2,219.06 | $2,219.06 | $2,220.00 |
The numbers become staggering. For the above scenario the person with the 30 Year Fixed will pay $215,607 in interest over the life of the loan whereas a person on the 15 Year Fixed will pay $99,432 in interest. That’s savings of $116,175! If you are comfortable with a 15 Year Fixed payment, it’s a great way to reduce the interest you pay on your loan while expediting your principal reduction.
OPTION 2: Biweekly Payments
If you pay your mortgage monthly, like most homeowners, you’re making 12 payments a year. However, most lenders provide an option to setup biweekly payments. Once enrolled in a biweekly payment structure, you’re paying half your monthly amount once every two weeks in lieu of 1 full payment per month. Since there are 52 weeks in a year, you will make 26 biweekly payments — This equates to 13 monthly payments for the year.
Because you’re making the equivalent of 13 monthly payments each year, you will have made the equivalent of 1 extra mortgage payment, all of which gets applied towards principal. So, you’ll pay less total interest while lowering your principal balance at a much quicker pace.
If we look at a 30-year fixed loan of $300,000 at a 4% interest rate, a person would save nearly $35,000 in interest over the life of their loan.
| 30 Year Fixed | Total Interest Paid | Time Loan Will Be Paid Off |
| Regular Payments | $215,607 | 30 Years |
| Biweekly Payments | $180,784 | 25.8 Years |
| Biweekly Savings | $34,823 | -4.2 Years |
OPTION 3: Paying Additional Towards Principal
Even though you may have a fixed mortgage rate and payment, you can always make an additional payment towards principal. This is similar to biweekly payments where additional funds are applied towards your principal balance, however you choose how much extra you want to pay and how often you want to apply an extra payment towards your loan. Whether you want to set up a recurring amount to be applied with each month’s mortgage payment, or if you want to just pay a little extra from time-to-time, you can choose how much to pay and how often, and the savings will add up.
Using the same $300,000 loan amount for a 30 Year Fixed at 4%, applying an additional $200/month will save you over $50,000 over the life of the loan. In addition to the savings your 30 Year Fixed loan will be paid off in less than 24 years.
| 30 Year Fixed | Total Interest Paid | Time Loan Will Be Paid Off |
| Regular Payments | $215,607 | 30 Years |
| Extra $200 Monthly | $165,196 | 23.8 Years |
| Savings | $50,411 | -6.2 Years |
Calculate Your Savings!
I am happy to provide a consultation to help you find ways to save money on your mortgage payment. Feel free to contact me for a time to discuss.
You can also use the chart below to estimate YOUR savings by incorporating one of these methods..
Chris Ulrich – United Home Loans
NMLS #215735
What’s a cash out refinance? Quite simply, a cash out refinance is when you finance the equity you have in your home with a long term mortgage, not an equity line of credit. This is typically done by paying off your existing mortgage balance with a new loan that’s greater than the loan amount you are paying off and your proceeds are greater than $2,000.
With the Fed continuing to raise interest rates, short term loans like home equity lines of credit are directly affected and have become a less desirable option if you’re in need of some cash. The equity in your home is just sitting there, so a cash out refinance is a great way to put that equity to work. Whether you want to pay off some debt, help fund your child’s education, do some home renovations or consolidate your home equity line with your current mortgage, a cash out refinance might be a great option for you.
Let’s look the max loan-to-value (LTV) for a cash out refinance on conforming-conventional and government loans:
| Owner Occupied: | |
|
85% |
|
75% |
|
85% |
|
100% |
| Investment Property | |
|
75% |
|
70% |
How It Works
Here’s an example of how a cash out refinance works for an owner occupied single family home. Let’s say you have a $200,000 loan balance and your home appraises out for $300,000. Since we can take the new loan to 85% of the value, we can pay off your existing $200,000 with a new $255,000 mortgage, giving you $55,000 in proceeds.
Consolidating Current First Mortgage and Home Equity Line
Let’s say you currently have a first mortgage as well as a home equity line of credit. You’ve probably noticed that your rate & payment has been going up on the equity line. Does it make sense to consolidate both loans, especially if you have a great interest rate on your current first mortgage? It depends on what the blended rate between both loans are versus what the new rate will be on the new consolidation loan. Most home equity line rates are structured around the Prime Rate. As Prime continues to rise, so does your blended rate. So even if your current first mortgage rate is lower than the rate on a new cash out refinance, it might still be worth consolidating to a new loan with a rate lower than your current blended rate.
I am happy to run scenarios for you and determine what options might be best for your specific scenario. Don’t hesitate to call or message me for a free consultation. My goal is to help you maximize your balance sheet but also find the right loan structure that fits your current and future goals.
Written By: Chris Ulrich – United Home Loans
NMLS# 215735
Whether you are purchasing or refinancing a home, we need to review bank statements. It’s important to know what we are looking for to prepare yourself for a smooth process.
In addition to assessing whether or not you’re able to regularly make your monthly mortgage payments, another role of mine is to make sure you have enough money for a down payment and closing costs. Part of how we do this is by reviewing your bank statements. However, we look a little deeper than just your account balance when approving or denying you for a home loan.
It’s important to make sure all your documents and records are sorted and straightforward before applying for a home loan.
Maintaining a “clean” bank statement
How many months
When applying for a loan, we will request two months bank statements. We will ask for all pages, including the junk pages. If your statement says “page 1 of 4”, then we will require all 4 of the pages. Online statements are acceptable but screenshots are not.
Multiple account holders
Is your bank account held jointly? Is there somebody listed on the account that is not on the loan you are applying for? If so, we’ll need a joint access letter from the other account holder stating that you (the person applying for the loan) has 100% access to all funds in the account.
Transfers from other accounts
The best thing you can do is limit the transfers. Any account you are transferring money from will have to be verified, especially if the transfers are large*. If you introduce another account, we’ll need two months of that statement. If you have large transfers into this new account, we’ll need to verify where those funds came from as well. The best thing you can do is limit the transfers over a 60 day period. *More on large deposits below.
Bank statement warning signs
Overdraft charges
Having a long list of overdraft charges in your account isn’t the best indicator that you’ll be a good borrower. No matter the circumstances, having a history of overdrafts or insufficient funds noted on your statement shows the lender that you might struggle at managing your finances. This isn’t always a deal breaker, but an underwriter may request a written explanation.
Large deposits
Another red flag to lenders is when a bank statement has irregular or lump-sum deposits. We need to make sure your funds are coming from an acceptable source. A large deposit is the sum of all deposits, not including payroll, which exceeds 50% of your gross monthly income. So if you earn $5,000/month, then the sum of your deposits must be less than $2,500, otherwise we’ll need to verify each of the deposits. Cash aka “mattress money” is not acceptable. Gifts and third party loans need to be explained, verified and documented appropriately. Unless you can provide acceptable documentation to paper-trail the large deposit, it’s likely we’ll disregard those funds, lowering your bank account total of acceptable funds for your down payment.
How to reduce bank statement scrutiny
Take extra care of your transactions for at least a few months before applying for a mortgage. Money that has been seasoned greater than two months will not show up in the account details of the statements we are verifying.
It’s best to start the process of organizing your bank activity and statements prior to applying for a loan. Start now. If that perfect home hits the market, you want to make sure your accounts are in order.
If you keep your bank statements top of mind in the initial search phases, you may have an easier time applying for a loan and ultimately securing it. Keep in mind that it’s best to maintain healthy finances throughout the closing process too. We will likely have to verify your earnest money deposit, so we may request additional bank statements prior to closing.
Written By: Chris Ulrich – United Home Loans
NMLS# 215735
You should be mindful of your credit profile throughout the entire process of purchasing a home.
Buying a home can be overwhelming for first-time buyers. Lenders will ask you many questions and have you provide documentation to support your application before granting you a loan. And of course, they will require a credit check.
I am often asked if we pull credit more than once. The answer is yes. Keep in mind that within a 45-day window, multiple credit checks from mortgage lenders only affects your credit rating as if it were a single pull. This is regulated by the Consumer Financial Protection Bureau – Read more here. Credit is pulled at least once at the beginning of the approval process, and then again just prior to closing. Sometimes it’s pulled in the middle if necessary, so it’s important that you be conscious of your credit and the things that may impact your scores and approvability throughout the entire process.
Initial credit check for pre-approval
The first thing I encourage any potential buyer to do is to get pre-approved. Many realtors may not even begin to show you homes until you’ve taken this first step. You can apply for pre-approval online, face-to-face or over the phone. Lenders want to know details such as history of your residence, employment and income, account balances, debt payments, confirmation of any foreclosures or bankruptcies in the last seven years and sourcing of a down payment. They will need your full legal name, date of birth and Social Security number as well so they can pull credit.
Once you find a home within budget and make an offer, additional or updated documentation may be required. Underwriters then analyze the risk of offering you a loan based on the information in your application, credit history and the property’s value.
Credit check during the loan process – maybe
Depending on how long it takes from your pre-approval until finding a home, contracting and then closing, a lot of time could pass. As determined by Fannie Mae guidelines, credit reports are only good for 120 days, so if you get pre-approved then find a home a few months later, your report may expire during the process and need to be re-pulled. Other reasons to re-pull might be to if you cleaned up some debt, removed disputes or had erroneous items removed that could impact your interest rate.
Final credit check before closing
Depending on how recent your initial credit report was pulled and how long your contracted closing date is, a lot of time can pass from the start of the process thru the date of your closing. Since your credit report is simply a snapshot of your credit profile, it’s understandable that things can change and new credit incidents may occur on your history. Lenders pull credit just prior to closing to verify you haven’t acquired any new credit card debts, car loans, etc. Also, if there are any new credit inquiries, we’ll need verify what new debt, if any, resulted from the inquiry. This can affect your debt-to-income ratio, which can also affect your loan eligibility.
This is known as a soft pull. We don’t actually generate new credit scores, and it will not show up as a hard pull on your credit record. If the final credit check results match the first, or if your debts have decreased, closing should occur on schedule. If the new report has increased debt, the lender may ask you to provide more documentation and send your application back through underwriting to make sure you still qualify.
It’s important for buyers to be aware that lenders run this final credit check before closing. If you ever need to open a new credit card or make a major purchase before your loan closes, be sure to contact your lender first to make sure the new debt doesn’t affect your approvability or your closing date.
Written By: Chris Ulrich – United Home Loans
NMLS# 215735
So you want to have work done to your house. Maybe you want a simple update, rehab your kitchen & bath, or maybe you want to put a full addition on the house. Where do you start and what program is best for you?
It starts with having to know a few things.
Knowing the answers to these questions will help us determine your program options.
Construction Loans or Construction-to-Perm loans
These typically are used for big jobs, additions and knock down/rebuilds. These loans require a bit of equity and/or additional funds out of pocket. Construction loans may require 20%-30% equity in your future home value. For example, if you have a $300,000 loan on your home and the future value after construction is $500,000, a construction lender that will finance up to 80% means your total loan can’t exceed $400,000 (80% of $500,000). The construction loan will pay off your existing $300,000, leaving you $100,000 for the work to be completed. However, if the work costs $125,000, you will have to put the additional $25,000 into the project.
Construction loans are typically short term. They have higher than market interest rates and are typically variable rate loans. As your home is being built or renovated, the lender will pay the contractor directly after each interval or phase of the build is completed. This can require multiple inspections and title updates/fees.
Once the work is completed and/or you obtain a certificate of occupancy, you’ll want a permanent or fixed loan. This is usually done by refinancing yourself out of the construction loan and into a fixed rate mortgage.
If you don’t have that much equity in the home or the future appraised value (based on comparable home sales in the area prior to the build), you can expect to have quite a bit of skin in the game.
Cash Out loans
This is the easiest way to get financing but will require the most equity because the future value of the home is NOT taken into consideration. We will look at your current appraised value and can lend up to 80% of it. For example, your home is worth $300,000 but valued at $400,000. We can only lend to $320,000. So your existing loan gets paid off with the refinance and you are left with an additional $20,000 cash. This might be perfectly fine if you just want to do a small job, update your kitchen cabinets or a bathroom.
Unlike a construction loan, you are given the money directly. This is nice because if gives you the flexibility to do some work yourself and purchase items that normally wouldn’t be included in a construction quote i.e. furniture, home theater or the catering for your house warming party.
United Home Loans Mortgage Makeover & FHA 203k
These programs are perfect for those people that have very little equity in their home. It is very similar to a construction loan but caters to individuals that just don’t have the funds saved to do the work. You’ll still need a licensed contractor, a quote for labor, materials, repairs and permits, and the contractor gets paid in phases throughout the process. The lending is also based on the future value of the home, but unlike the construction loans these are FIXED RATE loans and they have loan limits. Typically these products are used for renovations but NOT major additions. Do you have 5%-10% equity in your house and need $20,000 – $50,000 for updates? This is likely the perfect product for you.
Home Equity Line Of Credit
Think of this as a credit card with a lien (mortgage) on your house. You only make a payment based on the loan balance. Payments are interest only and can adjust with the Prime Rate. Anytime you hear about the Fed raising or lowering rates, you’re rate will be affected. Lenders are becoming a bit more flexible with credit lines up to 90% or 95% of your home value, but variable high interest rates make this product less desirable. The upside of the line of credit is your ability to draw on it, pay it off, then draw again and again as long as you leave the equity line open.
Whether it’s a minor update or major facelift, there are programs designed for your situation. Call or message me to discuss which option best fits your needs.
Written By: Chris Ulrich – United Home Loans
NMLS# 215735
