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Refinancing Benefits for Investors

Refinance Investment PropertyIt has been quite a good time for long-term interest rates reaching such low levels. Since it can’t be avoided that people will look for places to rent, there is a distinct advantage in investing in properties for renting. However, a loan that had good terms made before the purchase might no longer be a good option because the market conditions change. Which is why looking for a way to refinance for investment property should be one of the things that a good investor should keep in mind. It can greatly help in further increasing the cash flow of the investor to provide more passive income, but it can also be used for other gains.

Advantage of Refinancing

This option provides a way for investors to leverage the equity of their property and also to lower monthly payment. An increase in cash flow is the inevitable result, and it can also be turned into cash through cash-out refinance. By lowering the rate or increasing the term of loan, it may lower the monthly payment on mortgage and further increase the cash flow.

Renovation or repair can be done when you refinance for investment property and this will also improve cash flow since it will help increase the market value. There is also the option to build additional living space, upgrade the furniture, cabinets, floor and rooms, fix or upgrade the roof, and paint the house. This can make the property a lot more attractive if the investor plans to sell it in the future.

If the investor uses the property to rent it out, he or she can also increase the rent for the property and further increase his or her cash flow. Of course there is still a need to discuss things with the tenants so it is wise to do so first before any improvements are made.

Cash-Out Refinance

The cash-out refinance for investment property can be used instead to invest on more properties. This should not cause any issues because the equity of a property simply rises as the mortgage is paid, so an increase in value means an increase in the equity of the property.

Of course there are also other options for good use of converting home equity to cash. This can include investing in stock market, improve your savings for retirement, invest on the kid’s tuition, and consolidate debt. These are good ways to use the cash, but you can also use it to go on a dream vacation or buy a new car, although this is hardly using it wisely.

Many people should know that to refinance for investment property can provide a good source of money especially if they are looking to invest in real estate. With the equity on the property, it can give them an increase in their investment power and long-term wealth. It should be used wisely for diversifying passive income but there is also the benefit of using it not only for the property’s improvements but also for personal matters.

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Contact Us or call 469-358-9203 and we can discuss Financing options.

Little Reaction to EU Summit

With little economic data in the US this week, the focus was on Europe. Some investors were hoping that a more concrete plan to address the region’s issues would be announced during the week, but they were somewhat disappointed. As a result, relatively safer assets saw gains, and mortgage rates ended the week lower.

A highly anticipated EU summit left investors with mixed feelings and produced little reaction in financial markets. On Friday, European leaders announced that at least 23 of the 27 members of the European Union have agreed in principle to tighten their fiscal coordination and to limit budget deficits. The details, which will determine the effectiveness of the plan, are to be worked out in the future. In essence, investors viewed this news as only a small step forward.

What investors really would like to see is a major new aid program for the European countries with debt problems. The issue remains, though, that someone must pay for the aid, and the countries providing the funds understandably want to be reassured that the countries receiving the aid will demonstrate greater budgetary discipline. Investors expect that if European leaders eventually reach an enforceable agreement, then the European Central Bank (ECB) or another institution will provide additional aid. It appears that the European debt issue will continue to be a major influence on US financial markets for quite a while.

 

Also Notable:

  • Weekly Jobless Claims fell to the lowest level since February
  • Consumer Sentiment rose to the highest level since June
  • The European Central Bank (ECB) cut rates by 25 basis points
  • The Treasury will auction $66 billion in 3-yr, 10-yr, and 30-yr securities next week

Week Ahead

The big story in the US next week will be Tuesday’s Fed meeting. Investors will be watching for hints of additional monetary stimulus to boost the economy. The most significant economic data next week will be the monthly inflation reports. The Producer Price Index (PPI) focuses on the increase in prices of “intermediate” goods used by companies to produce finished products and will come out on Thursday. The Consumer Price Index (CPI), the most closely watched monthly inflation report, will come out on Friday. CPI looks at the price change for those finished goods which are sold to consumers. In addition, Retail Sales will be released on Tuesday. Retail Sales account for about 70% of economic activity. Industrial Production, another important indicator of economic growth, will come out on Thursday. Philly Fed, Empire State, and Import Prices will round out a busy week. In addition, there will be Treasury auctions on Monday, Tuesday, and Wednesday.

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Where the Work is Heading: 6 Top Job States

Daily Real Estate News |Tuesday, December 06, 2011

One factor reportedly holding many Americans back from purchasing a
home is job stability. But several states’ future looks bright when it
comes to adding jobs.

Texas is expected to add the most jobs over the next five years on a
percentage basis, according to Forbes (it edges out Nevada if you do not
round up the growth rate). Employment in Texas is expected to increase
by 2.9 percent annually through 20150— or add 1.6 million new net jobs
in that period, according to research from Moody’s Analytics.

Here are the states expected to grow the most with jobs in the next five years, according to Forbes:

1. Texas

Projected 5-year annual job growth: 2.9%

2. Nevada

Projected 5-year annual job growth: 2.9%

3. Arizona

Projected 5-year annual job growth: 2.8%

4. New Mexico

Projected 5-year annual job growth: 2.6%

5. North Dakota

Projected 5-year annual job growth: 2.6%

6. Utah

Projected 5-year annual job growth: 2.4%

Find out where else the jobs are heading.

Source: “Texas Tops the List of the Best States for Jobs,” Forbes (Dec. 5, 2011

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Free Credit Reports For All – But Watch Your Step

The Northeast, the last region of the country to be entitled to yearly free  credit reports, became eligible on September 1, 1995. Effective that date,  under the Fair and Accurate Credit Transactions Act (FACT Act) everyone  in the country is finally entitled to access their credit information once a year  from each of the three major credit reporting companies (Equifax, Experian, TransUnion).  This right has been rolled out on a regional basis since January, 2005.

Since we have been bugging you since very early this year about the importance   of obtaining at least one if not all three reports each year, it is our responsibility   to now issue some warnings about the practice.

So far as we know, there is absolutely no problem with ordering a credit report   through the channels set up by the Federal Trade Commission in compliance with   the Congressional mandate to receive these reports. Feel free and safe when   you click on www.ftc.gov (which   provides a link to the official site) or www.annualcreditreport.com   to order your free credit report. To order by phone call 877-322-8228  or by   mail print out the form available on anualcreditreport.com and mail to Annual   Credit Report Request Service, P.O. Box 105281, Atlanta, GA 30348-5281. Although   we still agree with experts that you should order one report every four months;   first from either Equifax, Experian, or TransUnion, and then from the remaining   companies at four month intervals even obtaining one or two reports a year will   enable you to monitor and prevent occasions of identity theft or to detect and eliminate errors on your credit report.

Potential Risks

However, like everything on the Internet, there are potential risks.   First, the Internet carries hundreds if not thousands of free credit report   offers from mortgage officers, credit counselors, and from people whose real   occupation you do not want to know. Some of these websites provide some valuable   services to you such as quick quotes on mortgages or assistance in obtaining   one, but the risk of supplying information about your Social Security numbers,   bank account, or other sensitive information is simply too risky to describe.   Do not request a free credit report from any of these sites!

Sandra Block, writing in USA TODAY a few weeks ago reported on problems even   within the approved free report universe. Experian, one of the three major credit   reporting agencies recently agreed to pay close to $1 million to settle charges   levied by the FTC that it had lured consumers through the offer of free credit   reports into paying $80 billed automatically on the consumer’s credit   card; apparently an undisclosed fee for subscribing to the company’s credit   monitoring service.

The many web sites that offer free credit reports are probably mostly benign.   But do you need to have your personal information and especially your Social   Security number floating out there among so many unknown parties? Hardly seems   necessary where there is a relatively secure (well yes, there is that Experian   thing) government sponsored web site.

Then, according to Ms. Block, there is what she calls “imposter sites” that   strive to “hijack” consumers looking for those free credit report. These sites   tend to use domain names that are close approximations of the legitimate web   site names to hook people using search engines or who key in typos while accessing   the real site. Researchers for the World Privacy Forum found 112 sites in June   that were using close derivatives of the “annualcreditreport” name. These sites   were the scary ones, phishing   for private informationto create mailing lists or to provide the basis   for identity theft. A number of them were linked to porn sites.

To reiterate our previous multiple nags. You must order and review your credit   report regularly and the fact you can do it free up to three times a year makes   this easy. But you must be careful. Use the official website, watch your typing   fingers, do not agree to pay anything to anybody and never, ever respond to   a request for a credit card. Report any suspected problems or violations to the FTC at www.FTC.gov.

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What are debt ratios?

In the commercial or investment real estate context, the debt ratio, also known as a debt service coverage ratio or debt service ratio, is the ratio of net operating income to debt payments. The higher this ratio is, the easier it is to borrow money to purchase or improve the property. In the personal finance context, a debt ratio is the ratio of personal debt to income.

The debt ratio is one of the most important factors used by mortgage lenders to determine whether to make a loan at all and the size of the loan. Ideally, the ratio will be greater than one. If it is greater than one, it means that borrower has enough income to pay all her debts and make other routine payments such as those necessary for utilities, food, and entertainment. If the buyer has a ratio of less than one, he does not have enough income to make his debt payments, let alone those other expenses. Not surprisingly, a lender does not want to lend to someone who does not have enough income to pay off all his debt. Instead, a lender prefers to see a ratio of about 1.3, which means that the borrower has about 30% more money than she needs to pay her debt – in other words, she has money to pay her debts and live on, too. Or, sometimes, the lender will make a loan to a person with a low debt ratio if the person has substantial assets or other income. For instance, a person with a low income, but significant stock portfolio may get a loan anyhow.

So, knowing that the bank likes to see a ratio of about 1.3, you can start to adjust your personal budget to hit that ratio if you are considering purchasing a home. People are often told that a good rule of thumb is to make sure that your debt is not more than about 35% to 42% of your income. It seems simple enough to remember this, but a buyer has to take a look at the math to make sure she isn’t operating under a false sense of security. For example, let’s assume a buyer has a monthly income of $3,000 and no debt. In this situation, the lender will make a mortgage loan of up to $1,000 per month because about $1,000 the buyer has the whole $1,000 available to pay off debt. Now, let’s assume the buyer has $4,000 in monthly income and $1,000 in debt. Sounds like the buyer is in a good situation, right? After all, $1,000 in debt is only 25% of the monthly income. Well, one-third of $4,000 is about $1,333. However, the buyer already has $1,000 worth of debt that needs to be paid off monthly, so the bank will only make a mortgage loan of about $300 per month. That doesn’t get the buyer much house. The lesson to be learned is that a lender will make a mortgage loan with a 1.3 debt ratio, but just because the lender will make it doesn’t mean the buyer will be able to purchase a house.

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Why do lenders ask to see recent paystubs?

Lenders ask to seerecent paystubs to verify your monthly  net wages which they use as a basis for figuring your monthly income. They often  ask to see more than one stub because it helps them gauge your wages more accurately  – that is you can’t inflate your income by showing an unusual month with more  hours or with an annual bonus or some such thing. Monthly income is important  because lenders use it to figure your debt to income ratio.

Yourdebt ratio is the ratio of personal debt  to income – in other words, it provides a simple representation of your  net income. Ideally, the ratio will be greater than one. If it is greater than  one, it means that you have enough income to pay your debts and make other routine  payments such as those necessary for utilities, food, and entertainment. If  you have a ratio of less than one, you do not have enough income to make your  debt payments, let alone those other expenses. Not surprisingly, a lender does  not want to lend to someone who does not have enough income to pay off all his  debt. Instead, a lender prefers to see a ratio of about 1.3, which means you  have about 30% more money than you need to pay your debt. The lender considers  this a comfortable margin for you not to be tempted to use your mortgage money  to go on vacation or pay medical bills or go out to dinner.

As stated above, pay stubs verify your monthly wages but don’t provide the  complete picture of your monthly net income, which is really what lenders are  interested in. Your monthly net income equals everything that comes in minus  everything that goes out. So, to figure everything that comes in, lenders check  to see if you have any non-wage income that supplements your  wages such as stock dividends, trust distributions or government benefits. They’ll  look at your credit report and tax returns to help determine everything that  goes out. Credit  reports help lenders figure how much debt you owe and pay off monthly, and  tax returns help lenders find hidden expenses such as medical expenses and charitable  donations. All this information allows them to get the most accurate figure  for your monthly income and thus minimizes their risk in lending to you. It  all starts with the recent pay stubs, by they need so much more information  to get the complete picture.

There are a few fairly simple reasons that lenders want to see recent paystubs, some of them obvious, some of them not so obvious.

The most obvious is to make sure that you are still employed.  If you apply for a loan on June 2nd and state in your application that you are currently employed as the Chief Bottle Washer at the Acme Widget Company, there is no reason that you shouldn’t be able to provide copies of your paystubs from May — unless you’re lying and really haven’t worked there since March.

Another reason, also related to fraud prevention, is to make sure the numbers match up.  If someone says on their application that they’ve been employed at a salary of $100,000 and have worked at the same company in the same position for two years, a recent paystub should show year-to-date earnings consistent with the information provided on the application.  Thus, if that individual’s pay stubs for May show year-to-date earnings of $10,000, there is an inconsistency that needs to be explained and documented to the underwriter’s satisfaction.  If that cannot be done (con artists aren’t always as clever as they think they are), it’s quite possible that someone will initiate a fraud investigation.

It’s pretty much a question of common sense:  If you were going to loan someone a significant amount of money, wouldn’t you want them to demonstrate to your satisfaction that they had the ability to pay the money back?

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The Mortgage Application Process


It goes like this. You can do the applicaton 1 of 3 ways.
• Over the phone

• Face to face meeting

• Online application

The loan officer fills out a loan application asking a variety of questions regarding name, ss#, date of birth, employments history, monthly income, bank account info and so on. The loan officer then requests documents to back up the answers filled out on the loan application. They may ask for identification, pay stubs, bank statements, retirement accounts, W2’s and tax returns.

As soon as this information is verified, the loan officer will be able to issue you a pre-approval letter. It’s much better to find a loan officer who is aggressive up front and knows the underwriting guidelines. If you hammer everything out up front and are aware of the obstacles you may face it will make the process go much smoother.

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A True Win-Win

 Traditionally, when buying and selling houses, most folks call on real estate agents to help them find the best home or the best deal. These agents usually focus on an interchange of available properties for sale, called the “Multiple Listing Service” (or MLS for short).

The truth is that the homes listed on the MLS are only a small fraction of all homes that may be available for you to buy at any given moment in time. In fact, the best deals are often homes that are NOT to be found there.

At Lincoln Heritage Mortgage we buy several homes directly from home owners in distress each month. And because we buy and sell them often without agents, we can make them available to you directly at substantial savings.

This puts the “win-win” back in real estate.

So why won’t real estate agents show you homes that are not in the MLS? The answer is simple: Because the AGENT is not protected in these deals. With homes that are in the MLS, the seller has agreed to pay a commission to the agent or agents who broker the deal.

When you work with Lincoln Heritage Mortgage you have access to the best financing options and a wide variety of homes that most real estate agents will never even present to you. Plus, you’re saving money because we buy low and sell low because we can.

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Lowest Rates and Prices

Home ownership has become so much more affordable than it was 3, 4 or 5 years ago. Dramatic price drops in almost all areas of the country have made home ownership truly affordable for everyone who can live responsibly.

Yet, the anxiety and outright panic that the media spreads about credit, lending and the banking industry may be tempting you to give up on your “Right To Own.”

Foreclosures all over the country are providing you with the cheapest, most affordable prices for homes in generations.

Foreclosures, Interest Rates & Affordability

Interest rates are still at near all-time lows. Put one and one together, and you get the lowest cost of home ownership that you might see in your entire lifetime right now. Why should you be left out now that you can actually afford the monthly cost of owning?

Our mission is to show you the way to your own home and give you options to choose from and put your plan of action towards home ownership in motion.

The truth is: Banks are lending now. The money is there, but you need help getting to it. Traditional lending is throwing curve balls at you now. If you don’t know about the hidden secrets and silent moves you can make to secure your financing you may think you are doomed to rent for the foreseeable future.

We will help you see your path to home ownership – it may be a lot closer than you think!

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Hidden Savings Secrets

Today’s interest rates are at their lowest levels. Home prices are more affordable today than they were in the entire past decade.

Owning a home is often less expensive than renting – even without looking at the biggest hidden secret to savings.

In fact, tax savings and benefits are often unknown to new and prospective home owners. Let me explain. When you pay mortgage interest on your primary residence rather than rent, you get to deduct these expenses on your tax return.

Claim More Exemptions Immediately

But not only that! Even as you move in to your own home, you get to claim more exemptions with your employer immediately. That means you will see an immediate increase in your monthly take-home pay, because less tax will be withheld from your monthly paycheck.

If you account properly for the tax savings, owning a home can cost up to 30% less than renting, and sometimes your savings can be even greater.

It Makes Sense To Own…

The “Power of Ownership” and being able to do what you want in your own home without having to ask your landlord are just two great benefits. Add to that the actual savings through tax benefits, principal pay-down and low-interest rates, and you will agree that it does not make sense to keep renting.

If you are still thinking that you can’t afford to own because you have been turned down for financing before, start the easy home ownership process with Rethink Realty right now!

Knowledge is power and that is what we bring to you.  Our program is specifically designed for you, because we believe in you and believe that you have a right to own.

Our job is to show you how put that plan in action.

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