The Proper Way of Refinancing your Rental Properties

Investing in real estate is one of the many ways to build up wealth. Homeowners buy a house, rent them out, and earn income from the rent. 

These houses for rent are purchased through home loans. If you have an investment property or more, you might want to revisit the interest rate as it might be high. Today’s rates are competitive, and you can take advantage of them by mortgage refinancing. 

Mortgage refinancing a rental property

You can get several advantages when you refinance your investment property. Below are some of the benefits that you can get. 

Lower interest rates
There is quite a difference in the interest of an investment property and a primary property. The interest rate of a rental property is higher than that of a primary house by 0.5% – 0.75%. The reason is that investment properties are riskier for lenders because banks and lending companies know that if you run into trouble with payments, a borrower will always choose to save their house than a rental property. For this reason, lenders implement higher rates on investment properties. 

However, if your rental property is doing well and your track record shows that you are doing well and can manage the payments, you can apply for refinancing and access lower interest rates. 

Changing loan terms
You can adjust your loan terms accordingly in a mortgage refinance. You can opt to pay more every month and shorten the loan length, or you can extend your loan terms as needed. 

Mortgage refinance rates can be changed from an adjustable rate to a fixed rate so that your monthly amortization is fixed. 

Increase rental income
To get the most out of your rental properties, you can do repairs and upgrades that will price your property higher. Some enhancements may include reroofing, adding a basement and renting it out separately, adding more space to the house, and adding appliances. A construction loan can finance these things, or if you are upgrading appliances, a mortgage refinance is the answer. 

What you need to do before a refinance

Before going into refinancing, here are some things to prepare and evaluate. 

Credit score
Knowing your credit score will help you understand your refinancing options if there are some loose ends that you need to take care of to improve your score. 

It is also helpful to know your current financial situation to take a mortgage to refinance. 

Secure documents 
Before refinancing your rental property, you need to gather financial documents similar to when you got the previous loan. These are some of the documents you will need to prepare:

  • Full-time investors do not have W-2, so the tax returns can be used instead to comply with the documentary requirements.
  • Copies of rent receipts to show your income helps lenders determine your debt-to-income ratio.
  • Bank statements so that the lenders can see how much cash you have saved and have something for emergency expenses.
  • Homeowners’ insurance is a requirement by all mortgage lenders.
  • Provide a copy of rental leases on your rental property because these can give the lenders an idea of how profitable your property is.

Monthly payments
Computing for the monthly amortization will help you set a budget and decide whether to lower your monthly payment or increase it to end the loan term faster. 

Property value 
Before refinancing, research the value of your rental property to give you an idea of how much you can expect. 

Types of refinancing options 

There are three types of mortgage refinancing: rate–and–term, cash–out, and cash–in. Checking your finances will help you decide which is best for you. 

Rate-and-term
Rate-and-term refinancing is where homeowners can change their current loan’s mortgage rates or loan term, or in some cases, both. The goal of this type is to save money.

Cashout refinance
In cashout refinance, you make use of the rental property equity, where equity is the portion that you own, depending on how much you have already paid on the mortgage. Cashout refinance is simply taking a loan against the value of your rental property.

Streamline refinances
Typically, lenders check your income, credit history, and assets. Low-doc refinance programs let you bypass the whole verification process called “streamlined refinance.” The term is such because the requirements are more straightforward and faster. 

In a streamlined refinance, lenders waive the home appraisal, income verification, and credit score. Homeowners can avail the streamlined refinance loan if they are backed up by the federal government, such as VA loans, USDA loans, and FHA loans. 

Searching for Reliable Mortgage Lenders

You can choose to work with the same mortgage lender unless you find someone who can give a better deal. There are several lenders to choose from so take your time to compare different offers.

You will want to shop around and compare quotes from various mortgage lenders. Shopping around and comparing rates can help you save money.  

Once you have narrowed down the offers, select the one that gives you the best advantage.

The internet is still the best place to find the best one for your taste. While looking, you can also read the reviews by other clients because this says a lot about the lender.

Blake Mortgage is a mortgage broker based in Arizona. Highly professional and work closely with clients. If you are looking to finance the rental properties or refinance your mortgage, you will get the support you need and help you through the entire process. 

Being in the industry for quite a long time, Blake Mortgage has developed an extensive network that can handle any transaction, no matter how tricky it can be. A company that has a personalized approach when handling clients.

With the low-interest rates today, more people are looking to buy investment properties and refinance their mortgages. Whether it is your first time or your nth purchase of real property, you want a mortgage broker whom you can trust.

Getting a Refinance Loan is Better Due to Lower Rates

The start of November has shown plenty of homeowners refinancing their homes. It’s a good sign for other homeowners who are still planning about whether they should get their houses refinanced. Mortgage refinancing has seen a considerable increase in applications since late July. The main reason refinance loans are rebounding this month is the lower rates.

Are you wondering if today is the right time to refinance your home?

What Is Refinancing?

Before we start showing you the numbers, some homeowners may not know what refinancing means. So, let’s start first with the definition of refinancing.

Today is the right time to refinance is getting a new mortgage contract that takes the place of the original mortgage. Getting a refinancing means a homeowner is trying to make advantageous changes to their interest rate, schedule of payments, and other terms in their contract.

Homeowners often opt for a refinance when there is a considerable change in interest rates in the market. That way, borrowers get to save money from their debt payments due to the new contract.

Reasons Why Homeowners Get Refinancing

Often, homeowners get refinancing to change their mortgage terms and make them more favorable for them in their situation. Long-term mortgages span for several years, and within those years, some shifts in the economic condition may occur. Also, plenty of changes may happen within those years in the borrower’s circumstances.

Some of the most common reasons homeowners apply for refinancing are to lower their fixed interest rates, change the length of the mortgage, or change their loans from an adjustable-rate mortgage (ARM) to a fixed-rate mortgage.

Borrowers may also experience a change in their financial situation during their loan duration. For instance, you may apply for refinancing if your credit score has improved. Also, if your finances have significantly improved, you can pay off your loans and merge them all into one loan with low interest.

The usual motivator for homeowners to refinance is the lower interest rates in the market. However, many factors influence the interest rates of mortgages and loans. Some of the notable factors include market competition, the economic cycle, and the national monetary policy.

Why You Should Refinance Now

You may be restarting the repayment clock with this new loan. Consider you’ve made five years of payments on your current 30-year mortgage. That means you have 25 years left to pay it off. If you refinance to a new 30-year loan, you’ll start over and have 25 more years to repay it. You’ll pay off There are several reasons to refinance your mortgage, even when interest rates rise. First, the average American homeowner could save over $260 per month by refinancing their current mortgage. If you have an adjustable-rate mortgage (ARM), now is the time to lock in a low fixed rate before it starts adjusting higher.

Perhaps you’re in a better financial position today than you were when you took out your prior mortgage. Refinancing may enable you to obtain a lower interest rate. 

The Numbers That Show How Well Refinance Is Doing Now

According to the Mortgage Banking Association (MBA), refinancing’s Market Composite Index gained 5.5%, 5.0% unadjusted, and on a seasonally adjusted basis. The reason behind it is the considerable number of applications for refinancing, and November has seen the most increase so far.

Since September 17, the Refinance Index has gone higher for the first time. It rose 7.0% as compared to the previous week. However, it was 28% lower than the same week a year ago.

The mortgage activity of refinancing based on total applications rose to 63.5%, compared to 61.9% during the week of October 29. It’s also notable that the average loan balance was the highest in a month in refinance applications.

The interest-rate environment changes right now are perfect for homeowners wanting to refinance their homes. Refinancing is your chance to improve your loan terms and potentially save money. So please  Book an appointment with us now or call us at 480-699-1055.

 

 

Top Loan Setbacks that VA’s Encounter

Are you an active service member, veteran, or surviving spouse? Do you know that you can obtain a zero-down payment VA home loan? This can be the best financing option to purchase a home or even refinance your home. Your dream to become a homeowner can be realized sooner than later. However, there are some setbacks you need to know before making a decision.

What is a VA loan?

A VA loan is a mortgage offered through the U.S Department of Veteran Affairs; VA loans are designed to help active-duty military personnel, veterans, and service members become homeowners at an affordable cost. VA loans have generous terms such as no down payment, require no mortgage insurance, have lenient rules for qualifying, to name a few benefits.

How do VA Loans Work?

Although the Department of Veteran Affairs offers VA loans, the government does not necessarily design the loans. The government, through the department, determines who qualifies for the VA loans and which lenders issue the loans. The department can either back you up in the loan or have the loan given to you directly. These loans come in a different form from which you can choose.

VA Loan Eligibility requirements

To meet the eligibility requirements, you must have done your service time. If you are on active duty, this translates to 90 consecutive days. If you are a National Guard or Reserve member, this means 90 consecutive days if you are activated or six consecutive years if you aren’t. If you are a veteran, the required service time varies. Find more at va.gov.

However, there are some setbacks you need to be aware of. Let’s discuss below; read on to find out more.

Funding Fee

Although VA loans have very generous terms, you have to pay funding at closing. This fee is charged to reduce the weight of U.S. taxpayers. However, the following are exempt;

  • A service member with service-connected disabilities
  • A surviving spouse of a Veteran who died in service
  • A service member who has received a purple heart

When you take your first VA loan and make zero down payment, the funding fee is 2.3 percent of the amount you are borrowing. With subsequent borrowing, the VA funding fee increases.

Here are some setbacks that VA’s tend to encounter along the way:

Primary Residences Only

Another setback of VA loans is that they are limited to primary residences as opposed to conventional loans. You cannot purchase a second home, an investment, rental property, or a vacation home; this is a significant disadvantage because you cannot purchase any property that brings you money. You are buying a liability instead of an asset in an absolute sense. Therefore, a VA loan is not the solution if you want to buy an investment property. In this regard, a VA loan encounters a loan setback.

VA Appraisals and Inspection

A VA appraisal comes with red tape around it. Because VA appraisals require additional information not needed by other loan-type appraisals. The VA is more extensive than any other appraisal. Some VA Loan Minimum Property Requirements(MPRs) include:

  • Adequate roofing
  • No lead-based paint
  • Mechanical systems that are safe to operate
  • Adequate heating systems
  • No signs of termites, dry rot, or fungus growth
  • No crawl spaces and signs of leaks in basements

Although the intensity of the VA appraisal can keep potential borrowers from owning defective properties, the closing will take ages. Due to the bureaucracy of the government, the appraisers are slow and end up undervaluing homes.

Seller Resistance to VA loans

Many sellers find VA loans unattractive; this makes them uncomfortable, and they end up resisting VA home loan deals. Some of the reasons are; VA appraisals- as discussed above, which impose minimum property requirements that require a home to meet the agency guidelines for safety and livability. They have extensive appraisals such that they undervalue homes. Which makes sellers resist most of them. In some markets, sellers must pay closing costs if veterans buy a property with zero down payment. Most sellers frown at such offers. The closing process may be extended due to delayed paperwork in most instances. Sellers want fast business, and this is not pleasing to them at all.

You May Have Less Equity in Your Home

Ironic because buying a home with little or no money is one of the most significant advantages of a VA loan. However, this can also be a disadvantage. Once you move into the home, you’ll have a property that is 100% financed. When the VA funding fee is added to the loan amount, you’ll be in a negative equity position from the beginning. If the property’s value increases in the market, this becomes a temporary problem. But, if the market is either flat or declining, there’s a severe problem. If you need to sell your home and have no equity, you may be forced to write a check at the closing table to cover any closing costs associated with the sale; not a typical case but a potential disadvantage you need to be aware of.

Finally, even though you’re eligible for a VA loan, it may not be your best financing option to purchase a home. Depending on your financial position, you might want to weigh your options and choose the best option for yourself. If your best choice is a VA loan, then be sure to do your due diligence and find a reputable VA lender. The lender you choose will determine how your loan application process will go. Finding a company that does a substantial amount of VA business is the safest way to take. Most lenders have no experience with VA loans and may end up giving you unnecessary headaches.

5 Things to Avoid During a Construction Loan

Building a home is an exciting and complicated process. It’s exciting because you get a chance to tailor your home according to your lifestyle, budget, and family. It gets tricky when the costs add up fast and you don’t have the cash on hand to pay; this is when a construction loan comes in handy. When applying for a construction loan, there are some things you need to avoid. Read on to find out more.

What is a Construction Loan?

A home construction loan is a short-term, higher interest rate loan that provides the money required to build a residential property. The loan duration is usually one year. The property is built, and a certificate of occupancy is issued during that period. The funds are allocated in stages as the work progresses.

How Do Construction Loans Work?

As mentioned above, construction loans have variable rates which move up and down with the prime rate. Construction loans have higher rates than traditional loans; this can be attributed to the fact that your home acts as the collateral with conventional loans, but construction loans have that privilege. You provide the lender with a detailed plan and a realistic budget. It helps them plan on how they are going to issue the funds.

Some of the things you need to avoid during a construction loan are explained below.

Avoid Early Starts

An early start may seem reasonable because you have a timeline – you want to get started with the project right ahead. However, this can be a risky undertaking. An early start can significantly delay the loan closing. The title agency will request an early start coverage if the construction has already started. There is no guarantee that this will be granted, resulting in no title insurance coverage. In this case, your loan may not be even be closed.

Avoid Additional Loans or Credit Lines

It would be wise to stick with your current loan during the construction period. Never add another loan or credit line, or you will get yourself in trouble; this can be detrimental to the project because it increases the total cost of borrowing and the level of debt on a project, leading to difficulties in repayment.

Do Not Do the Building Yourself

It gets more difficult when you are doing the building yourself. Lenders are hesitant to lend money to owner-builders. They are afraid that non-professionals have more chances of delays and problems. Unless you are a professional contractor, maybe they would.

Avoid Changing Jobs at The Time of Construction

Many people think that it is a good idea to be changing jobs during the construction process. Your construction loan is dependent on your employment. Any sudden changes are never a good idea.

Avoid Going Past Due on Other Existing Loans

When you have other existing loans during the construction period, it is best to pay on time. Any past due can lead you to late fees or penalties.

It is crucial to stay close to your lender during the construction period and inform them if anything does not go as planned. So before starting your construction loan, make sure you know what to avoid. The more you are knowledgeable, the lesser headaches you will encounter.

References

https://www.bankrate.com/mortgages/construction-loans-explained/

https://www.quickenloans.com/learn/construction-loan

https://www.thebalance.com/basics-of-construction-loans-315595

How To Get Cash Out of Your Investment Property With No Income Documentation

As investment values increase in many areas, savvy real estate investors recognize the opportunity to tap into their property’s equity. A cash-out refinance on investment property is one of the best opportunities to make the most out of this situation. There are countless uses for those funds — home improvement projects, adding new property, or managing other financial needs unrelated to the property itself. Depending on the amount of equity, you could see a significant amount of financial improvement, especially with a cash-out refinance with no income documentation.

How does a cash-out refinance on investment property work?

A cash-out refinance allows the property owner to secure a new mortgage on the property for more than they currently owe on it. They then receive the difference (new mortgage amount minus what is owed and closing costs). Using a real estate investment, it’s possible to capture funds during these high home value times to use to advance your portfolio or simply lock in low rates for other needs.

Why use a cash-out refi?

Many property owners, including investors, have equity in their real estate that they don’t tap into and use as readily as they should. Yet, they may be paying a much higher interest rate on unsecured debt or battling financial difficulties in managing their investment business. Interest rates on real estate are competitive — and the same goes for cash-out refinancing. Taking advantage of those funds now may help to make your financial future a bit stronger.

What are the details and specs of a cash-out refinance on an investment property?

If it is time to improve your cash reserves through a cash-out refinance loan, here’s what you can expect from us:

•      Get up to 75 percent loan-to-value on your home – no reserves required

•      You may not need any employment or income documentation to secure these funds.

•      Boost investor cash flow to use as you need.

•      Borrow up to $2 million

•      30-year fixed loan (no bothersome adjustable-rate mortgages to worry about)

You can use this type of loan on most types of real estate, making it more accessible to many real estate investors. That includes:

•      Single-family residences

•      2-to-4-unit condos, townhomes, and non-warrantable condos

•      Non-owner-occupied properties only (cannot be used on primary residences)

There are a few other things to know about a cash-out refinance on investment property. For example, to qualify on cash flow, you’ll need 12 months reserves for negative cash flow. The cash-out can be used to cover reserves.

What can you do with a cash-out refinance loan right now?

Expand your horizons when you consider all the potential options for using these loans to meet your needs. Many times, property owners use these funds to put value back into their investment properties. You can do this in many ways, including home improvements. Get the property in better shape so you can attract a higher-paying tenant. It may be possible to use these funds to expand the existing property’s footprint through an addition. That may allow investors to increase their rental opportunities.

Other investors use these funds to invest in another property. Buying another rental property with a low interest rate and low monthly payment using these funds simply makes sense for many people. It is one of the best ways to expand a real estate portfolio in current conditions.

Pay down personal debt with these loans. While mortgage payments may continue for a bit longer on the property, you may be able to comprehensively pay down your debt outside of that loan. Doing so may save you money since interest rates tend to be much lower on a cash-out refi than personal, unsecured debt.

Use the funds in any way that fits your needs right now. Tuck them away for the future. Know that a cash-out refinance loan is one of the most effective ways of utilizing the value of your property.

The Benefits of Using Unsecured Business Purpose Loans

For many small businesses, obtaining a business loan can be quite difficult as many small business owners don’t have the collateral to pledge for a traditional secured loan. Therefore, unsecured business purpose loans are often a better option. While unsecured business loans are often tougher to qualify for and can carry higher interest rates than secured loans, they ultimately hold less risk for borrowers. 

Below, you’ll learn more about the benefits of using unsecured business purpose loans, how unsecured business loans work, and the steps you can take to obtain an unsecured business loan today. 

Understanding Unsecured Business Loans 

Essentially, unsecured business loans work in a similar manner as traditional secured business loans. However, the main difference is that borrowers are not required to offer a form of collateral with an unsecured business loan. But, as with any loan, there are pros and cons to securing this type of funding for your small business financing needs.

Pros of Unsecured Business Loans 

  • They can be easy to obtain because they typically offer a faster application process compared to secured business loans. 
  • Unsecured business loans can offer a quick approval time, with some lenders approving unsecured business loan applications in as little as 24 hours. 
  • There are often fewer restrictions associated with unsecured business loans. 
  • There’s less fear surrounding property loss as lenders must have a court order to take business or personal property if an unsecured business loan isn’t paid. 
  • If your business files for bankruptcy, courts often discharge unsecured loans, whereas secured loans are typically not discharged. 

Cons of Unsecured Business Loans 

  • Lenders typically require personal guarantees. This means that the owner of the business signs an agreement in which they agree to personally repay the loan if the business is unable to do so. 
  • Unsecured business loans are often riskier for lenders since they do not have collateral such as real estate to secure the loan, which typically causes these types of loans to have a higher interest rate. 
  • With unsecured business loans, the repayment terms are often shorter, and they may require more frequent payments.
  • Qualification for an unsecured business loan often has much stricter qualification requirements and can be difficult to obtain, especially if you or your business have a low credit score. If you don’t qualify for an unsecured business loan, you might want to look into other financing such as lines of credit, a merchant cash advance, or other business credit cards..  

Now that you know what an unsecured business loan is and its pros and cons, let’s look at how unsecured business loans work.

How Do Unsecured Business Loans Work? 

Unsecured business finance options work like traditional types of secured debt financing. However, with unsecured business loans, borrowers are not required to provide lenders with any form of collateral. Overall, instead of looking at the borrower’s collateral, lenders look at the borrower’s creditworthiness. Generally, you must have a minimum credit score of 680 for a bank to consider you for an unsecured business loan.  Lenders also look at the loan amount and the business’s cash flow to determine whether the business is a good risk in terms of providing a loan. 

Steps to Obtain an Unsecured Business Loan 

To obtain an unsecured business loan, you will need to follow certain steps to make sure you are even eligible to apply. The following includes some of the criteria you will need to meet in order to qualify for an unsecured loan from a bank. 

  • You will need to have multiple years of documentation for your business. 
  • It is in your favor to have a strong personal credit score. 
  • You should have an excellent annual revenue as banks examine this element before granting a loan. 

Once you have determined if you meet the criteria of the three elements mentioned above, you can then start the process of obtaining an unsecured business loan from the financial institution of your choice. It is also beneficial to create a detailed business plan before seeking an unsecured business loan from a bank or other financial institution. 

In your business plan, be sure to include:

  • A company description
  • What products or services your business sells
  • The management structure of your business
  • An analysis of the industry your business is in
  • A SWOT analysis of your business
  • Any other vital information regarding your business

When applying for an unsecured business loan, keep in mind that the most likely place to obtain this type of loan is from an alternative lender rather than a traditional bank. Popular alternative lenders are financial technology firms that use automated technology to determine a small business’s credit history and overall creditworthiness. Frequently, alternative lenders end up charging borrowers more than traditional banks or credit unions. These are all elements to consider when looking to obtain an unsecured business loan from any type of financial institution, including the Small Business Administration’s (SBA) small business loans. 

How Blake Mortgage Can Help  

Hopefully, through this overview on unsecured business loans, you have been able to see some of the benefits this type of loan can provide to you and your small business operation. If you’re looking to start the process of obtaining an unsecured business loan, then Blake Mortgage is here to help. 

The dedicated team at Blake Mortgage works diligently to connect you with a wide variety of financial institutions that are willing to lend money to small business owners seeking loans. Whether you’re worried about qualifying for a loan or simply getting the best rate, we can help. 

Are you ready to discover how Blake Mortgage can help you obtain a business loan today? If so, give us a call or make an appointment to learn more.