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Adjustable Rate Mortgages

Jul 5
Category | General

A LIBOR ARM may be for you if you:

  • are looking to minimize your monthly payment.
  • are seeking to lower your interest rate and monthly cash flow.
  • want to take advantage of the eqity in your house.  This is a good refinance program for those who want to consolidate consumer debt such as credit cards.

Any ARM is a good idea if:

  • ARM interest levels are significantly below fixed-rate interest charges.
  • you anticipate a higher income in the future.
  • You won't be staying in the house for more than five years (especially if you have a locked-in rate for the first three, five, or seven years).

ARM's are NOT a good idea if:

  • initial rates are comparable to fixed-rate loan rates.
  • high closing costs offset the low interest rate.




This ad is not from HUD, VA, or FHA and was not reviewed or approved by any government agencies.

What is Escrow?

Jul 5
Category | General

In a significant transaction, you may wonder if you can trust the person on the other side of the deal.  Escrow is an arrangement where money is held by a neutral “third party” until both parties meet their obligations.

In real estate, we are usually talking about the home buyer and the home seller negotiating a home sale.  The buyer will pay the agreed upon amount by a specific time, and the seller will provide the asset being sold. 

Of course, most transactions are more complicated than that.  For example, the buyer may want the right to inspect the property before paying, or the seller may want the deal to close by a certain date or they move on.  An escrow company can provide a “referee” service, ensuring that all conditions of the contract are satisfied and everybody does what they agreed to do before any funds or assets are released.

Escrow closes when everything is done and the property ownership transfers to the buyer.

What can happen if you don’t use escrow?

An earnest money deposit is probably the first time you’ll notice escrow in a home sale. The buyer writes a check payable to the escrow holding company, who will either refund the money, apply it to the purchase price, or pass forfeited funds on to the seller if the buyer fails to meet any requirements. If the check was payable directly to the seller, the buyer would take a significant risk. There’s little to stop a dishonest “seller” from cashing the check immediately and making it difficult for the buyer to complete the purchase?

Earnest money in escrow also prevents the seller losing money should the buyer decide not to purchase the home at the last minute.  Depending on the contract, if the buyer backs out of the deal without a legitimate reason, the money held in escrow will go to the seller for their troubles.

Escrow also helps protect buyers in the event an inspection found something that needed repairs.  Let’s say the basement leaks. If the seller agrees to repair the issue, but a final inspection shows that it wasn’t correctly repaired, the buyer’s money is safe until the basement is fully repaired.

Escrow after the Sale

After you buy a house, money can be held in escrow to help make it easier to manage multiple payments like taxes, insurance, and mortgage. The escrow agency where the money is held will make sure the right amount is paid to the appropriate company on time.



This ad is not from HUD, VA, or FHA and was not reviewed or approved by any government agencies.

Some people mistakenly believe that once they are approved for a home loan nothing will alter their approval. Unfortunately, this is not the case. Lenders watch your credit report right up until closing day. Because the loan process involves examining factors such as your credit, income, debt and assets, you want to avoid or postpone several common activities that could change these figures while your home loan is being processed. 

Don’t Make Any Big Credit Purchases

Big credit purchases can change your financial situation quickly.  Sharon Bast, with Mann Mortgage, AZ states, “I’ve had several situations where people are in the process of buying a house, waiting for a loan to close… and in their excitement, they buy furniture, new appliances, or even a new car.  Because of the new debts they have acquired, they no longer qualify for the mortgage.  That means they don’t get the house. It’s classic.”  As a general rule, refrain from purchasing big ticket items before signing your closing papers.

Don’t Switch Jobs

This might be out of your control, but it’s wise not to actively switch jobs during the loan-approval process.  Employment verification is standard protocol for a loan officer, and a career change could mean adjustments to income and therefore revisions to the approved amount or even outright denial.  The day of funding, someone will call your employer to ensure you are still employed.

Don’t Open or Close Lines of Credit

When it comes to your credit, you should not make any drastic changes. It’s important to maintain the same credit profile throughout the entire loan process until your mortgage paperwork is signed and you have closed on your new home.

“We pull credit when the application is submitted and we “refresh” credit to account for any new or increased debts just prior to closing to make sure no major changes are showing,” says Sharon Bast of Mann Mortgage, AZ.  “If there are any significant changes the client can go from qualifying to not qualifying.  That means the deal could possibly fall through.” 

Although it may seem appropriate to apply for a credit card at a furniture or hardware store when buying a home, steer clear of this at all costs. Applying for new credit can lower your score. In addition, your lender may worry that you will spend too much and default on your loan.

Also, do not close any current lines of credit. Instead, just pay them off like you would every month. Closing credit cards can be hazardous, if your lender needs to pull anew credit report.  Closing accounts lowers your credit score.

Don’t Make Any Big Deposits Into Your Bank Account Without a Paper Trail

You will be required to show the source of funds for your down payment and closings costs, if applicable. Do not move any money around without a paper trail. Payroll deposits are fine, but if you have any unusual deposits over $800, you will need to provide complete documentation of where the money came from.

Tod, a 32 year old mechanic from Thatcher almost lost a mortgage through this process. “My father gave us a gift contribution, and [the bank] insisted on verification from all angles: my bank statement, his bank statement, the canceled check, a letter from him. Everything had to be sourced from every possible angle.”

If You’re Not Sure, Ask

It’s important to understand that any major changes in personal income, assets or debt can alter the terms of your mortgage, or destroy it altogether. If you’re not sure how an action may affect your application, ask your loan officer for advice.



Sharon Bast NMLS ID 1392708

This ad is not from HUD, VA, or FHA and was not reviewed or approved by any government agencies.

Everyday Teachable Moments

Money is often a taboo topic in most homes. But you can help your children learn financial lessons that will last a lifetime by looking for teachable moments in your every day life that naturally bring up the topic of money. Here are some examples of teachable moments to help you get started:


When depositing your paycheck, talk to your kids about:

Budgeting some of your paycheck to pay for rent, utilities, and food.

Saving a portion of your paycheck for future expenses like college tuition and retirement.


When grocery shopping, talk to your kids about:

The difference between a need and a want - milk is a need, candy is a want.

Using coupons, buying in bulk, and other ways that you can save money on groceries.


When using your credit card, talk to your kids about:

Paying for these purchases every month when the credit card statement comes in the mail.

How using a credit card is like taking out a small loan for each purchase.


When giving children an allowance, talk to your kids about:

Setting up a budget. For example, decide how much to save, spend, or share with others in need.

Setting a financial goal, such as buying a new bike, and figuring out how to achieve it.


When using an ATM machine, talk to your kids about:

How the money is coming from your account at the bank.

Keeping track of your balance so you don’t overdraw.


Buying Down Your Rate

Jun 6
Category | General

With a mortgage loan there are closing costs.  One of the optional closing costs is the possibility of mortgage discount points.  A discount point is essentially prepaid interest.  It is an upfront fee that you pay to lower the interest rate on your mortgage.  Each point costs 1% of your mortgage loan amount.

Because purchasing points lowers your interest rate, it is often referred to as “buying down the rate”.

Deciding whether to buy mortgage discount pints comes down to time and money.  How long will you stay in the house, and how much can you afford to pay to buy down the rate?

When you know how long you’ll stay in the home, you can calculate at what point you’ll break even on the cost of the points.  It makes sense to buy points when you’re purchasing a long-term investment property or a home you plan to hold for many years since you’ll see the savings after breaking even.

If you have extra cash to add to your down payment, you can consider buying down the rate as well.  It’s also a good strategy if the seller is willing to pay some closing costs.  But if you pay them yourself, mortgage points usually end up tax deductible. 




This ad is not from HUD, VA, or FHA and was not reviewed or approved by any government agencies.

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