Home Equity Basics

By owning your own home, equity allows you to build wealth through time. Homeowners are responsible for maintaining the house after the mortgage closes, but it’s not for nothing. Home equity builds with each payment made towards your mortgage and the value of comparable sales in your neighborhood.

Home equity is the value of your home beyond how much money is owed. If your home is worth $350,000 and $300,000 is owed, you have built $50,000, or 14%, home equity.

Equity can be calculated in many ways, including down payment at the time of purchase, loan amount, appraisal value, paying toward principal, and depreciation.  

Home equity can be used as a loan through a Home Equity Line of Credit (HELOC) or a home equity loan. Lenders usually won’t allow borrowers to mortgage more than 80% of their home’s total equity, but what can be borrowed can be used for a variety of things. Some borrowers use the money to pay off credit card debt, school tuition, taxes, and more. 

Though equity generally rises over time, sometimes, depending on the market value of your home, equity can go negative. If your $350,000 home dropped in value to $280,000 due to an economic decline and if you still have a $300,000 mortgage, the equity will be negative by $20,000. A payment in full would be required to bring the equity to a break-even point. If you are not planning on moving soon, this wouldn’t be an issue, but if you are looking to sell your house, it can be difficult to manage the difference. 

Increasing your home equity involves paying down your mortgage and making minor or major repairs such as replacing your garage door, adding stone veneer, refreshing your kitchen or bathroom, resurfacing the driveway, replacing flooring, painting, roof repair, etc. 

Home equity is important for increasing your wealth and dramatically increasing the value of your house. As long as you don’t overspend on remodeling and know all the fees and costs associated with your loan, your equity can grow substantially.

Looking to buy or sell your home or commercial property? Or perhaps you’re thinking about a Home Equity Line of Credit (HELOC) or a home equity loan to pay down debt or make renovations? EB Mortgage offers the best rates for traditional and specialty lending. Contact us to learn more.

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EB Mortgage is a locally owned mortgage company with experts in new home purchase, refinancing, and commercial loans. Our wholesale rates can’t be beaten. We offer more products, more options, and more solutions. Our “3C” Process is simple: complete our pre-approval request, consider options based on your requirements, and choose the offer that suits your needs best. Call us or e-mail us today! 

Written by the digital marketing team at Creative Programs & Systems: https://www.cpsmi.com/

Home Equity Statistics

Home equity is a hot topic lately, especially since home prices have escalated recently. In the second quarter of 2022, the average level of equity for homeowners with mortgages reached almost $300,000. Over the past five years, home equity has been skyrocketing, spurred into overdrive by the pandemic. 

According to the National Association of Realtors, in March 2020, the median price of an existing home in the United States was $280,000, and by October 2022, it jumped to $379,000. 

Three ways to increase your home equity: 

  • Making consistent monthly mortgage payments
  • Completing home renovations
  • Increasing neighborhood or city value

Just as equity can rise, it can lower as well; this is called “negative equity.” This happens when the homeowner owes more on their mortgage than the home is worth. Negative equity is not an issue for most people, thanks to the spike in home values, but that doesn’t mean it won’t be a factor when the housing market cools down. 

Some home equity statistics: 

  • HELOC and home equity loans jumped by 47 percent between January and May of 2022.
  • Hawaii had the highest home equity spike in 2022, at an average of $130,000.
  • In the third quarter of 2022, home equity dropped by $1.3 trillion.
  • Since March 2020, the average homeowner with a mortgage has gained $92,000.
  • The home values throughout the US’s 50 biggest metro areas have increased between 19 and 66 percent.
  • Defaulted mortgages accounted for less than 500,000 homes as of September 2022.

Home equity is an attractive benefit of homeownership. Making monthly mortgage payments are a better alternative than paying a landlord rent every month, as a mortgage allows you to build wealth. 

Are you interested in building wealth through a home mortgage? You’ve come to the right place; contact EB Mortgage today to learn how we can help you tomorrow.

EB Mortgage is a locally owned mortgage company with experts in new home purchase, refinancing, and commercial loans. Our wholesale rates can’t be beaten. We offer more products, more options, and more solutions. Our “3C” Process is simple: complete our pre-approval request, consider options based on your requirements, and choose the offer that suits your needs best. Call us or e-mail us today!  

Written by the digital marketing team at Creative Programs & Systems: https://www.cpsmi.com/

What is a Reverse Mortgage

Reverse mortgages are specially designed for homeowners 62, and older looking to supplement their income, cover healthcare expenses, etc., by converting part of their home equity into cash. The homeowner retains the title and gets an advance on some of the home equity in lieu of paying monthly mortgage payments. While this may be enticing for some, it’s important to know that a reverse mortgage will eventually result in fewer assets for you and your family. Read on to learn about the different types of reverse mortgages, how to qualify, get the best deal, and more. 

While regular mortgages require homeowners to pay the lender monthly, reverse mortgages require the lender to pay the homeowner. Reverse mortgages allocate part of the homeowner’s equity and convert it to payments, tax-free. As long as the homeowner lives in the same home, they do not have to pay the money back unless they sell their home, move out, or pass away.

The three different types of reverse mortgages are: 

Single-Purpose: Offered by some state and local government agencies and nonprofits. They are the least expensive options and can only be used for home repairs, improvements, or property taxes. 

Proprietary Reverse Mortgages: Private loans backed by developmental companies; these are tailored towards higher-valued homes.

Federally Insured Reverse Mortgages: Also known as Home Equity Conversion Mortgages (HECMs), these are backed by the United States Department of Housing and Urban Development (HUD). Many factors are associated with HECMs, such as age, home appraisal value, interest rates, and more.

Lenders for reverse mortgages usually charge a service fee, closing fees, along with mortgage insurance premiums. As the homeowner acquires money, interest is added each month. So over time, the amount of money the homeowner owes rises with interest. Reverse mortgages often come with variable rates, which are associated with a financial index and fluctuate based on the market. Interest on reverse mortgages is not tax-deductible until the loan is paid off. With a reverse mortgage, the homeowner is responsible for property taxes, insurance, utilities, fuel, maintenance, and more. 

Reverse mortgages can be helpful for some people but might not be the best option for others. It’s important to compare fees, costs, understand total costs, loan repayment, and more. 

Are you interested in applying for a Reversed Loan? Contact the loan experts at EB Mortgage today. 

EB Mortgage is a locally owned mortgage company with experts in new home purchase, refinancing, and commercial loans. Our wholesale rates can’t be beaten. We offer more products, more options, and more solutions. Our “3C” Process is simple: complete our pre-approval request, consider options based on your requirements, and choose the offer that suits your needs best. Call us or e-mail us today!  

Written by the digital marketing team at Creative Programs & Systems: https://www.cpsmi.com/ 

Obtaining Cash Through Home Equity Loans, HELOCs

As a homeowner, you are automatically building equity through time, which can be used to secure low-cost funds by obtaining a second mortgage. Through one-time home equity loans or a Home Equity Line of Credit (HELOC), these options are available for you to access cash for renovations, large purchases, or alternative debt repayment. 

Home equity loans and HELOCs are secured against the value of your property, which allows lenders to offer lower rates than other types of loans. 

A HELOC is a specific amount of money that can be used at your discretion. Similar to a credit card, these loans are repaid over time. However, they accrue lower interest rates on outstanding balances, and these loans are accompanied by variable interest rates and serve as a revolving source of funds that you can access whenever you choose through online transfers, checks, or credit cards connected to that account. There are few, if any, closing costs associated with HELOCs, and untapped funds do not charge interest.

Home equity loans are often given as large lump sums of cash, often accompanied with a fixed interest rate. These are good for individuals who need money for a one-time expense such as a wedding or home renovation. These loans generally exceed $35,000 or more. Closing costs associated with the first mortgage also need to be paid, such as loan-processing fees, origination fees, appraisal fees, and recording fees. Prepaid interest might also be required at closing. 

These loans use your house equity as collateral by calculating the difference between the value of the home and the mortgage balance. The downside to these types of loans is that lenders typically place a second lien on the home, giving them rights to it – along with the first mortgage lien – if there is a default. The more the borrower obtains, the more they are at risk.  

Mortgage brokers generally have the best deals on home equity loans due to their ongoing relationships with lenders and investment pools. If you need extra cash, a second mortgage can be a realistic option. Lenders might be willing to offer lower rates because they are secured against the your home’s equity. Remember to calculate the extra loan payment and factor it into your monthly budget, and don’t go into default, or your home could be at risk of foreclosure. 

If you’re looking for fast cash, you’ve come to the right place! Contact the experts at EB Mortgage to get started today.

EB Mortgage is a locally owned mortgage company with experts in new home purchase, refinancing, and commercial loans. Our wholesale rates can’t be beaten. We offer more products, more options, and more solutions. Our “3C” Process is simple: complete our pre-approval request, consider options based on your requirements, and choose the offer that suits your needs best. Call us or e-mail us today! Written by the digital marketing team at Creative Programs & Systems: https://www.cpsmi.com/

Credit Scores Explained

Let’s face it, most of us don’t have a couple hundred thousand dollars under our pillow to buy a home or even a new vehicle. We need banks to loan us large amounts of money for big-ticket items. How do banks determine who qualifies for a loan by calculating our credit score?

Your credit score is 100% up to you. How does it work?

First, we explain how the banks obtain your scores. Loan institutions use three credit bureau agencies: TransUnion, Equifax, and Experian, to get your score. They submit your social security number, and each company gives a score from 300-850. The higher the score, the better.

The three credit bureau agencies use FICO and Vantage Score to determine your score. Below are the five items FICO uses to determine your score:

  • 35% Payment History – Pay down/off loans that are currently outstanding
  • 30% Amounts Owed – Do not spend more than you make. Keep your loan-to-debt ratio below 30% (not including your mortgage debt) but all other debt owed like vehicle loans, credit cards, student loans, etc. Experts say to stay below 10% if you want to maintain a credit score in the high 700s
  • 15% Length of Credit History – Keep the line of credit/loan open, even if the balance is zero. Do not apply for a dozen credit cards just because you can. The credit limit, even though it’s zero, the balance goes against your credit score under income to debt (#2 above.) Furthermore, do not close a bunch of credit cards either because the score is also measured by history by 15%.
  • 10% Mix – Keep a mix of credit (a car loan, a credit card, and a mortgage.) Lenders like to see a borrower who can handle a combination of loans.
  • 10% New Credit – Restrict yourself from applying for credit of any kind unless you have planned this through. Every time a creditor submits your application for a loan, it reduces the current score. They say 5 points or more for every pull.

Keeping a healthy, high credit score takes discipline and constant work. If you have questions or need help obtaining a loan, contact the experts at EB Mortgage today!

EB Mortgage is a locally owned mortgage company with experts in new home purchase, refinancing, and commercial loans. Our wholesale rates can’t be beaten. We offer more products, more options, and more solutions. Our “3C” Process is simple: complete our pre-approval request, consider options based on your requirements, and choose the offer that suits your needs best. Call us or e-mail us today! 

Written by the digital marketing team at Creative Programs & Systems: https://www.cpsmi.com/

Experts Spot Recession Signs in Michigan

Soaring prices for items such as gas, airline tickets, food, and more are signaling alarms to economic experts. According to a June report by the University of Michigan Surveys of Consumers, buyer sentiment decreased by 14.4 percent in June, and roughly 79 percent of consumers anticipate bad times for business conditions in 2023. 

University of Michigan economist Joanne Hsu said, “As higher prices become harder to avoid, consumers may feel they have no choice but to adjust their spending patterns.” Some economists project a 50 percent chance that the United States economy will slide into a recession before 2024. 

For Michigan, the automotive industry is a telltale sign of a potential recession, as huge layoffs generally begin there. When people are out of work, they swiftly cease taking out vehicle loans. 

Strong consumer demand has outpaced supply, as semiconductor shortages have put auto production behind for nearly two years. This unusual trend is leaving automakers with empty lots. Car sales in April and May of 2022 were ultra-low due to lack of supply, not demand. 

According to some consumers, a recession is already happening due to the United States jobless rate being 3.6 percent in June for the fourth month in a row. For Michigan specifically, the jobless rate was 4.3 percent in May. 

Technically, a recession is labeled as an economy that shows negative growth for two consecutive quarters. It is possible that the United States economy could slip into this trend, but the stark recession in 2020 lasted only two months at the beginning of the COVID-19 pandemic. 

The Great Recession took place between December 2007 and June 2009. The jobless rate stayed around nine percent and higher for most of 2009 and 2010. 

Gabriel Ehrlich, director of the University of Michigan’s Research Seminar in Quantitative Economics, says he doesn’t see a recession as inevitable. He warned that a recession could be sparked by the Federal Reserve’s effort to fight inflation along with the war in Ukraine. 

“All bets are off if supply chains have major problems. That’s the number one wild card.”

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EB Mortgage is a locally owned mortgage company with experts in new home purchase, refinancing, and commercial loans. Our wholesale rates can’t be beaten. We offer more products, more options, and more solutions. Our “3C” Process is simple: complete our pre-approval request, consider options based on your requirements, and choose the offer that suits your needs best. Call us or e-mail us today!  

Written by the digital marketing team at Creative Programs & Systems: https://www.cpsmi.com/ 

Alternative Loans Explained

Conventional loans are not the only way borrowers can get approved – alternative loans include non-conforming loans, stated income loans, Alt-A loans, portfolio loans, and others. Where conventional loans cannot provide purchasing power, alternative loans can work for the right buyer. 

Alternative loans are meant to assist unconventional borrowers to secure financing. Atypical buyers can include those who are self-employed, receive income from unconventional sources, don’t have established credit, have high debt-to-income ratios, credit struggles, or exhibit other unique life experiences that complicate securing a traditional loan.

For certain property types, it can be challenging to secure a traditional or government-backed loan; alternative loans are also useful in these cases. 

The requirements for alternative loans differ from those for conventional loans. Usually, they are more relaxed and do not make the same requisites. For example, buyers might not have to show all of their income sources or might be able to receive a loan even if their employment history is inconsistent or challenging to verify.

Some alternative loans include: 

  • Low Down Payment: Borrowers can apply for a low- to nonexistent down payment. Since there is no official governmental oversight, the requirements vary between lenders, but overall, the rules are more flexible. 
  • Credit: Buyers with credit issues (no credit established, short credit history, credit problems, etc.) can benefit from alternative loans. Usually, this happens when the borrower is very young or has no credit cards or other debt in their name.
  • Debt-to-Income: A high debt ratio to income can immediately disqualify a borrower for standard loans. Stated income loans are an alternative that does not subject the buyer’s income to verification. 
  • Employment: People who are self-employed, newly employed, promoted, career change, etc., might struggle to secure a traditional loan. In these cases, an alternative loan is best to get them into a house they truly love. 

The right lender can help you apply for an alternative loan. Work with an experienced mortgage advisor to ensure you fully understand the fine print and can be led in the right direction. 

Unconventional loans often include a higher interest rate; even with a good rate and adequate terms, it is important that borrowers applying for alternative loans are honest and truthful about what they can afford. 

Are you looking to secure an alternative loan? Contact the experts at EB Mortgage today. 

EB Mortgage is a locally owned mortgage company with experts in new home purchase, refinancing, and commercial loans. Our wholesale rates can’t be beaten. We offer more products, more options, and more solutions. Our “3C” Process is simple: complete our pre-approval request, consider options based on your requirements, and choose the offer that suits your needs best. Call us or e-mail us today!  

Written by the digital marketing team at Creative Programs & Systems: https://www.cpsmi.com/ 

Four Ways to Improve Curb Appeal

Making a first impression with potential buyers can be a hit-or-miss scenario. In today’s seller’s market, it’s important to hook buyers…but how? The simplest answer: curb appeal. 

Your home’s appearance can have a huge impact on how much money a potential buyer is going to fork over. Houses with a poor exterior sell for seven percent less than those that are polished and attractive, according to a recent study

Business professor Sriram Villupram at the University of Texas at Arlington programmed computers to recognize features such as trimmed shrubs, manicured lawns, and inviting flowers on more than 400 Google Street View images. 

Villupuram said, “The value of curb appeal could be as high as 14 percent during cold residential markets. This study also brings to light the value of homeowners’ associations and their covenants, which tend to maintain a uniformly positive curb appeal for the neighborhood as a whole.” 

Read on for seven tips and tricks for making your home more appealing to potential buyers.

Landscape
A 2019 survey of real estate agents found that well-landscaped homes sell between one and 10 percent more than those with no landscaping. Potted plants, window boxes, hanging planters, trimmed and edged grass, raked leaves, pruned trees, etc. are all surefire ways to boost curb appeal. If you have a patio or deck, don’t leave it empty. Add a bench or some chairs to invite buyers. 

Polish
Pull out your (or rent a) powerwasher and start cleaning your driveway, porch, siding, etc. Use some elbow grease and wipe all windows, clean walkways, handrails, and more. Sparkling clean windows let more natural light into your home, making it much more appealing. 

Replace
Swap out old light fixtures for new ones, paint (or replace) your front door, and add bright, LED light bulbs throughout your home to make it appear more refined. If your home has drab, old house numbers, replace those with new ones as well. Don’t overlook your mailbox, either! 

Upgrade
If your appliances are even slightly out-of-date, try updating some – or all – to give your home a sleeker look. If your home is not energy-efficient, consider upgrading windows, smart thermostats, light bulbs, and home appliances. 

Are you looking for a mortgage? You’ve come to the right place. Contact us today.

EB Mortgage is a locally owned mortgage company with experts in new home purchase, refinancing, and commercial loans. Our wholesale rates can’t be beaten. We offer more products, more options, and more solutions. Our “3C” Process is simple: complete our pre-approval request, consider options based on your requirements, and choose the offer that suits your needs best. Call us or e-mail us today! 

Written by the digital marketing team at Creative Programs & Systems: https://www.cpsmi.com/

Do High Interest Rates Mean Cheaper Houses?

The housing market has never been as hot as the last couple of years. A combination of a low inventory, supply chain issues, and high demand has sent prices through the figurative roof at a record pace.

No longer bound to downtown offices, remote workers can save thousands on housing costs by migrating to the suburbs and beyond. The most significant contributor for those moving has been record-low interest rates on mortgages.

But with news that the Federal Reserve is raising interest rates on fixed-rate home loans, many are wondering if housing prices will fall as a result. Unfortunately, the truth is that the answer isn’t a universal one as some markets will see slow growth while others may not even notice.

Right now, the interest rate increase is driving demand from those who don’t want to miss out on locking in a low rate for the next 30 years. While higher lending costs tend to make buyers require a lower sales price, the focus has instead been on taking the plunge solely for the interest rates.

The interest rate of a mortgage makes a massive difference in the overall cost. For example, a $400,000 home at 2.8% will end up with about $200,000 in interest over the life of the loan. On the other hand, if interest rates hit 6%, the total interest paid would exceed $450,000. That’s an additional $250,000 for the same house, which is why buyers are so keen to snag the lowest rate possible.

Another area impacted by interest rates is the rental industry. If interest rates increase too much, potential home buyers may rent instead. This possibility has many looking to invest in rental properties with historically low rates.

EB Mortgage is a locally-owned mortgage company with experts in new home purchase, refinancing, and commercial loans. Our wholesale rates can’t be beaten. We offer more products, more options, and more solutions. Our “3C” Process is simple: complete our pre-approval request, consider options based on your requirements, and choose the offer that suits your needs best. Call us at 866-246-0516 or e-mail contact@ebwmtg.com today.

Written by the digital marketing team at Creative Programs & Systems: www.cpsmi.com.

Federal Reserve Raises Interest Rates for First Time Since 2018 to Combat Inflation

In March, interest rates were increased – with six more increases scheduled before year end – marking the most aggressive pace in over 15 years. The Federal Reserve hopes to thwart rising inflation, which is at its highest levels in four decades.

Rising to a point between .25 percent and .5 percent, the benchmark federal-funds rate is increasing for the first time since 2018.

When the coronavirus pandemic hit the United States in 2020, rates were nearly at zero. Now, officials have hinted at raising the rate to nearly two percent by the end of 2022. By the end of 2023, rates could inflate as high as 2.75 percent, the highest since 2008.

Federal Reserve Chairman Jerome Powell said, “As I looked around the table at today’s meeting, I saw a committee that’s actually aware of the need to return the economy to price stability and determined to use our tools to do exactly that.”

The ballooned interest rates are a sharp reversal from only two years ago, when rates were near zero and the economy received a plethora of support as countless shutdowns plagued the country. Record job losses were recorded, along with a severe two-month recession.

Economic output has since recovered, thanks to huge federal stimulus and vaccination availability, but Federal officials were weary that inflation might not diminish as quickly as they once expected. The annual wage growth is near its highest pace in years, and the unemployment rate has fallen to 3.8 percent in February.

The average 30-year fixed-rate home loan jumped above 4.25 percent recently, according to the Mortgage Bankers Association. This escalation is an increase of almost a full percentage point since late 2021.

Housing vacancy rates have been at their lowest levels in decades due to a limited supply of homes and apartments combined with steady job gains. Through the past six months, rates went up at a 5.5 percent annualized pace, the largest increase since 1986, according to the Labor Department.

EB Mortgage is a locally owned mortgage company with experts in new home purchase, refinancing, and commercial loans. Our wholesale rates can’t be beaten. We offer more products, more options, and more solutions. Our “3C” Process is simple: complete our pre-approval request, consider options based on your requirements, and choose the offer that suits your needs best. Call us at (616) 228-8797 or e-mail contact@ebwmtg.com today.

Written by the digital marketing staff at Creative Programs & Systems: www.cpsmi.com.