Is it better to do a fixed or adjustable rate mortgage?

This has puzzled many individuals shopping for loans; and is completely depends on your goals. An adjustable rate mortgage (ARM) is a loan type that has a fixed rate for a period of time and then adjusts to match industry standards. An ARM typically offers a lower rate during its locked period and will remain low provided market rates don’t rise significantly.

The ARM’s counterpart, the fixed rate mortgage, is as its name implies fixed until paid or refinanced. Throughout the rise and fall of interest rates a fixed rate won’t budge until the loan is paid in full or refinanced.

When deciding which one is best for you, keep these factors in mind:
   • how long you plan to stay in the home
   • your ability to digest the unpredictability of changing rates
   • your long term mortgage goals

A Mortgage Consultant can help determine which one will produce the greatest immediate and long-term rewards for you.

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Should We Escrow?

It all depends on your ability to invest the money and have it available come tax season. If you need the safety and stability of a monthly payment to guarantee the funds are available, then we suggest escrowing.

Escrowing is a forced savings for the homeowner. Some like the program because they have the convenience of someone else making sure their taxes and insurance are paid on time. Others want to have the free cash to invest and earn interest on their funds or to spend on vacation, bills or anything you want.

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Is it necessary to get a pre-approval and commitment letter?

It is always advantageous to get pre-qualified to buy a home. With the pre-approval you will receive a commitment letter which gives you credibility with prospective sellers, especially if you are competing with other contracts for the home. Realtors also place a great deal of emphasis on a commitment letter because it allows you to know the realistic price of home you can afford.

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What type of down payment assistance is available?

There are many options for those with little or no down payment. An FHA loan is a government program designed for homebuyers with little or no down payment and perfect or less than perfect credit. Many programs will allow seller concessions which can help absorb closing costs. Ask a Pinnacle Mortgage Consultant about the many additional options available to our clients.

Check our Affordability Calculator and our Monthly Payment Calculator for more information.

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What if my scores are good but my partner’s are not?

Your partner’s actual scores will determine whether or not it will be beneficial for you to include him/her on the loan. If you choose not to use your partner on your mortgage you can still include him/her on title. However, if your partner’s scores will not significantly affect your approval or rate, adding him/her to the loan should help strengthen his/her credit scores in the long run. A Pinnacle Mortgage Consultant can provide further information on placing your partner on the loan.

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Am I eligible for any tax breaks, credits or deductions?

Since Uncle Sam wants you to attain the American Dream, he gives many tax breaks to homeowners in the form of deductions. The largest tax deduction associated with ownership is the interest paid on your mortgage. Homeowners may be able to deduct the property taxes paid on their real estate as well as pro-rated real estate taxes paid at closing. This amount shows up on the settlement statement. Most mortgage fees and costs paid to secure your mortgage are also deductible within the year paid and will be itemized on the settlement statement. Keep in mind that some mortgage programs will offer larger deductions than others. Check with your tax professional for other deductions, tax benefits and qualifications.

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What is a housing bubble?

The housing bubble debate has existed for many years now. Economists describe a housing bubble as a neighborhood where home values increase by more than 25 percent for two or more consecutive years. Bubble believers say that exploding housing prices do not parallel the much slower increase of income. If a bubble bursts, home prices deflate. You can reduce your risk from a real estate recession by looking for undervalued properties, buying defensively, making a sizable down payment, and staying put.

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What exactly does debt consolidation entail?

A debt consolidation loan will combine your mortgage with any outstanding balances – credit cards, installment loans, second mortgages, etc. In most cases consolidating your debt is beneficial because mortgage interest is tax deductible whereas other debt is not (other than student loans and 2nd mortgages).

If you do have credit card debt and pay only the monthly minimum, that debt can linger forever. This is because credit cards utilize compound interest whereas mortgages and home equity lines of credit use simple interest. Compound interest charges interest on the sum of the unpaid interest and the original principal. It is not tax deductible. Simple interest is paid only on the original principal. Simple interest can be tax deductible.

Therefore, eliminate all debt outside of first mortgages when possible. It is wise to seek the advice of a Mortgage Consultant to review your financial situation and determine your personal benefit in refinancing and consolidating debt.

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When is it time to refinance?

With rates constantly rising and falling, that remains a loaded question. Some suggest refinancing when rates drop at least 2% lower than your current APR. Other professionals recommend refinancing to consolidate debt. Finally, you could refinance to use current equity to update your home, go on vacation, save for retirement, investments, or pay for your child’s education – anything you like! As your needs change, so might your finances. A refinance could help align your debt to make more sense.

The only way to determine whether your rate and payments are commensurate to today’s market is to have a Pinnacle Mortgage Consultant analyze your current financial position. This free service provides a detailed comparison of your current rate and program to today’s market.

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Can I still qualify with a Bankruptcy?

There are two main types of bankruptcy – 7 and 13.

   • 7 – Due to new restrictions, most will no longer qualify for this type of bankruptcy. A chapter 7 basically wipes away all debt
     without reimbursement or payment of any kind.
   • 13 – This is also known as the wage earner plan. A chapter 13 rolls together your debt into one, lower payment owed to a
     bankruptcy trustee over a short timeframe. Although bankruptcies are not favorable, a chapter 13 is looked upon more
     favorably than a chapter 7.

An alternative to bankruptcy is using the equity in your home to help pay off debt. If you have experienced a bankruptcy, you may still be eligible to buy or refinance a home. Unlike decades ago, programs are available that allow us to provide financing to those one day out or even still in the midst of a bankruptcy. Government programs with down payment assistance are also available to those who have paid twelve months into their chapter 13.

Please Contact a Mortgage Consultant for more information or Apply Online now.

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How can I boost my credit score?

If your mortgage consultant has advised you to work on your credit in order to qualify for a better program or rate, you have several options. For starters, do not open any new lines of credit unless absolutely necessary. Each new loan or credit card could knock several points from your score.

Another way to boost your score is to keep all credit balances less than 50 percent of their high limit. For example, if your credit card has a maximum of $5000, don’t charge more than $2500 to the account. If you already have, pay it down to half of the amount of the high limit or pay off all of your debt with a home equity line of credit. Paying the minimum on credit card debt of $5000 at a typical 19 percent, will keep you indebted for over 20 years.

Even if your credit is less than perfect, Subprime lending now accounts for almost 1/3 of all mortgages industry-wide. We offer a variety of programs for those without perfect credit. A consultant can discuss mending your credit and choosing the best program for you.

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What can I gain/lose by paying off a mortgage early?

Like finding a program, your amortization schedule really depends on your financial goals. A new program is available to help you pay off your mortgage early and save thousands in interest costs without changing your spending habits. Simply deposit into the loan, reducing principle and saving interest costs. The funds stay in the account, and you have access to them at all times.

If you have both a mortgage and revolving debt, it would be much more beneficial to pay off other debt since the interest paid on those loans is not tax deductible and usually has a much higher interest rate. However, it is perfectly fine to pay off a mortgage early if it helps reach a financial goal such as retiring debt free.

There are many opinions whether or not to pay off a mortgage early. A financial planner and accountant may even have differing views on this topic. Both the accountant and financial planner will have correct arguments regarding this topic; however Pinnacle’s goal for you is to devise a program that will allow you to gain financial and equity wealth quickly.

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Do I need mortgage insurance with financing over 80 percent?

Private Mortgage Insurance (PMI) protects the lender in the event a borrower defaults on the mortgage. Lenders generally require PMI whenever the equity is less than 20 percent of the house’s market value. When the equity in the property reaches 20 percent due to payments on principal or appreciation in value, PMI may be terminated or reduced.

Even though PMI is typical, you may not necessarily need it. A Pinnacle Mortgage Consultant can structure a loan program that does not even require PMI.

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Is Pinnacle an Equal Housing Lender?

Yes. Pinnacle adheres to the Equal Credit Opportunity Act (ECOA). This federal law prohibits lenders to discriminate based on age, race, sex, marital status, national origin, religion, or received public assistance income. The only reason a lender may ask for voluntary disclosure of this information is to help federal agencies enforce anti-discrimination laws.

Although ECOA prohibits discrimination it does not assure everyone will qualify for a loan. In fact, the law allows creditors to factor in income, expenses, debt, and credit history. If one does not qualify for a loan, lenders must specify the reasons for rejection or how to locate such information.

Pinnacle is an Equal Housing Lender and an Equal Opportunity Employer. Pinnacle abides by all ECOA regulations, providing equal access to rates and programs without regard to age, sex, race, marital status, nationality, sexual orientation, handicap, or geographic location. For more information visit the Federal Trade Commissions Web site.

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Investment Properties

Ever thought of trading in the stock market for the real estate market? It’s a popular and lucrative business that many have mastered. Not only have investors jumped on the bandwagon, but television networks air how-to shows dedicated to property investing. Determining your goals and expectations is the central element in finding the financing option that works best for you. You must ask yourself:

    1. Is income or equity wealth more important?
    2. How long do I plan to keep the property?
    3. How many investment properties do I plan to purchase?
    4. Do I want the lowest monthly payment to capitalize on rental income or long term security for equity building?
    5. How much am I willing and able to use as a down payment?

The truth is investment property financing is a complex industry. Pinnacle fully comprehends real estate investments from both a financial and business standpoint as many of our mortgage professionals were once real estate investors. You wouldn’t trust your stock market investment to a rookie; do not take a similar risk with your real estate investment.

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