Good news! HLEFCU mortgage loans are serviced in-house. So, from application to pay-off, the same great people will always be your point of contact. Give us a call at 808.973.4311 for questions regarding your mortgage application, making your payments, and more!
Buying a home is a BIG deal. So, before you begin applying for a mortgage and looking for a home, there are a few important questions you need to ask yourself.
Is your income stable?
Do you plan on having any major life changes in the next few years? Examples of these changes include changing jobs or starting a family; anything that could impact your financial situation
Can you handle making house repairs yourself or paying a specialist to do them?
Are you able to commit to staying in the home you purchase for at least five years?
If you're wondering whether renting or purchasing a home is best for you, consider the following:
Benefits of Buying
Make your home your own. When you own your own home, you're free to make changes as you please; no need to obtain a landlord's approval
The interest payments you make as part of your overall mortgage payment can be tax-deductible.
Your home is your nest egg. With every payment you make, the amount of principal you owe decreases and your equity in your home increases. Further, making improvements to your home can boost its value which, in turn, boosts your equity. Equity can be used in the form of a Home Equity Loan or Second Mortgage to fund more improvements or pay down other expenses you may have.
Benefits of Renting
You aren't responsible for maintenance or repairs. Did a pipe break or did the fridge stop working? Call your landlord and they'll take care of it.
Property tax? Homeowners insurance? Not your problem. However, you should probably protect your belongings with renters insurance.
Relocating is easier since you don't have to worry about selling or renting out your home.
Buying a home isn't just a big decision or emotional commitment, it's also an enormous financial one. So, before you decide to buy a house, you'll want to make sure your financial house is in order.
Do you have a stable job?
Do you typically pay off your credit cards every month? Or do you carry a balance?
Do you have a plan for managing debt like student loans and auto loans?
Have you saved enough for the down payment and closing costs? Typically down payments range from as low as 3% to 20% of the purchase price. Bear in mind, however, that down payments below 20% often necessitate the payment of private mortgage insurance. Closing costs vary by loan.
Have you built up an adequate emergency savings account? A good rule of thumb is to have three months of income saved up.
Can you really afford the payment? While the principal and interest payments make up the bulk of your mortgage payment, there are other monthly costs you need to factor in as well. These typically include:
Property Tax
Homeowners Insurance
Homeowners Association Fees (if applicable)
Maintenance Fees (if applicable)
Utilities
The first step in determining if you should refinance your mortgage is figuring out why you want to do so. Typically, there are three major reasons you'd refinance your mortgage.
Take Cash Out
If you're planning on undertaking a significant expense like renovating your home or want to rid yourself of student debt or high-interest debt like credit card debt, then cash-out refinancing might be an option for you. Use the equity in your home to unlock the money you need at competitive rates. Plus, like the mortgage you used to purchase your home, the interest you pay on a cash-out refinance mortgage may be tax-deductible, saving you even more.
Lower Your Payment
Shrinking your monthly mortgage payment can help you free up money for other things in life, and, depending on your situation, there are a couple of ways to accomplish this.
If rates have gone down since you originally made your mortgage, you may be able to reduce your monthly payments simply by refinancing at a lower rate. But, this method not only has the potential to save you on your monthly payment, but it can save you a ton in interest payments over the life of your loan
For those that used a first-time homebuyer or similar home loan that allowed you to make a lower down payment, you can lower your monthly payments by refinancing to get rid of your private mortgage insurance payments (PMI). PMI is often mandated when you make a down payment that's lower than 20%. But, once your loan-to-value ratio falls below 80%, you can refinance to get rid of the PMI.
Minimize Your Total Interest Paid
If lowering your monthly payments isn't a priority, but minimizing the amount in interest you pay overall is, then consider refinancing your mortgage under a shorter term. Mortgages with shorter terms often have lower interest rates, which can save you big in the long run. However, shortening the term of your mortgage may cause your monthly payments to increase too.
Before you apply for a mortgage, there are a few things you should do to prepare yourself for the application process.
Review Your Credit. Get a copy of your credit report and score for review. This way, you can determine what your credit health looks like and whether or not there are issues you need to take care of before you apply for your mortgage. You'll want to be especially mindful of any derogatory marks in your credit report.
Minimize Your Debt. As with any loan, the less existing debt you have, the better your chances of being approved. Further, if you do get approved for a mortgage, the fewer obligations you have, the better your chances will be for obtaining a larger approval amount. So, before applying for a mortgage, be sure to reduce your current outstanding debt as much as possible.
Stability Matters. If you're looking to apply for a mortgage soon, it's a good idea to keep the job you currently have. Mortgage lenders typically like to see employment stability, so applying for a mortgage one month into a new job may cause some concern.
Gather Your Documents. When applying for a mortgage, you'll need to provide proof of income. To do so, you'll typically need to provide your W-2s for the past two years, recent pay stubs as proof of your current pay, bank and/or investment statements to show proof of assets that will be used to pay the down payment and closing costs, and supporting documents showing evidence of any other sources of income you'd like to have considered. Those that are self-employed will need to provide tax returns from the previous two years, including all relevant schedules and other supporting documents as necessary.
Run Your Numbers. While not necessary, it's a good idea to make your own calculations before applying for a mortgage. Mainly, you'll want to figure out how much you're comfortable paying without overextending yourself. When looking over your numbers, be sure to account for not only your current debts and expenses, but also new ones that you might not currently be paying for such as utilities.
If you find yourself needing help figuring out what you can comfortably afford, how changes in your life will impact your ability to borrow, or even how to best manage your debt, then give us a call at 808.447.2286. We're always happy to help.
When you think of your mortgage payment, typically all you think of are the principle and interest payments you make, as is the case with any other loan. This is especially true since most mortgage calculators present you with just the principle and interest payment when you're trying to figure out your monthly payment for a particular loan amount. However, mortgage payments often include other items as well, which makes your actual monthly payment amount higher than the simple principle and interest payment. So what are those other items included in your mortgage payment?
Property Tax. Paying property tax is part of homeownership virtually anywhere in the U.S. It is often calculated as a percentage of your property value, which can change year-to-year. As a result, property taxes can cause an increase or decrease in mortgage payments based on the assessed value of your home.
Homeowners Insurance. Having homeowners insurance is an important part of owning a home. It's necessary as part of a mortgage loan, as it protects the security interest lenders have in your home. But it also protects you and your own investment in your home and can also protect the contents of your home. How much you pay in homeowners insurance, however, will vary greatly based on factors like where you live, your deductible, and so forth.
Mortgage Insurance. Known as Private Mortgage Insurance (PMI), mortgage insurance is only necessary when you're putting down a small downpayment. However, once your loan-to-value ratio dips below 80%, it's a payment that will disappear. The purpose of mortgage insurance is to protect the lender in case you default.
HOA and Maintenance Fees. Homeowner Association (HOA) and maintenance fees are fees levied by your homeowners' association to help pay for maintenance and improvements to common areas in your condominium or neighborhood. For condo owners, the fees typically pay for the maintenance of the lobby area, elevators, pools, and so forth, while in neighborhoods the fee will cover things like recreational centers, private roadways, and more.
Your HLEFCU mortgage loan payments will include property tax, homeowners insurance, and, when necessary, mortgage insurance. When we receive your payment, we apply your principle and interest payments just as we would with any other loan, while also putting your property tax and homeowners insurance payments into an escrow account. Then, when those items become due, we pay them on your behalf from your escrow account. Although HOA and Maintenance Fees are considered part of your housing expense, they are not included in the loan monthly mortgage payment. HOA and Maintenance Fees are paid by you to the specified management company and should be budgeted for when determining how much home you can afford.
The loan-to-value (LTV) ratio is exactly what it sounds like. It's a measure of how much you owe on your loan in comparison to the value of your property. To calculate your LTV, you divide your loan amount by your property's appraised value amount (for purchase transaction = the lower of the appraised value or purchase price). For example, if your home is worth $600,000 and your mortgage loan balance is $450,000, then 450,000/600,000 = 0.75 or 75%. And, remember, if you're trying to avoid mortgage insurance when opening your loan, you'll want to ensure that your LTV is 80% or lower.