10 Questions to Ask Your Lending Company

Mortgage Approved

Most people think of a lot of critical questions before choosing a lending company. They will want to know how to apply for a home loan, which type of home loan they can use, and what amount they will receive.

If you’re looking for a lender, you probably have a lot of questions as well. And that’s a good thing. Coming to a lender with a list of hard questions is the perfect way to prepare for the process.

TwinCity Lending can help you answer the essential questions below. Reach out with all of your questions. We’ll give you honest answers based on your unique home buying requirements.

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1. What are discount points?

Discount points are kind of like prepaid interest when arranging for a mortgage. This up-front payment is beneficial to you because it can reduce the rate on your mortgage, resulting in a lower monthly payment.

While they lower your interest rate, discount points also give you tax benefits and save on costs when buying a new home.

It’s imperative to ask your lender if the points are right for you. They are not appropriate for every situation. Also, be sure to find out how long it will take you to pay any other additional upfront costs.

2. What guidelines should someone follow to qualify for a loan?

Applying for a home loan is a process that requires an understanding of each part of the application process. Different lending companies have unique requirements in regards to each mortgage.

At a minimum, most lenders consider the following things:

Credit score: Every lender will require your credit score when you apply for a home loan. A higher credit score will result in a better chance of getting your loan approved quickly.

Qualifying income: Most companies will require you to have a consistent and sufficient income to be eligible for a loan.

Down payment: Some loan products require a 20% down payment. Some might not need a down payment at all. FHP loans include a 3.5% down payment, while VA loans often don’t require any down payment.

3. How long is the application process?

The mortgage application process begins when you present the required documents to the lending company. They will then determine your loan eligibility and let you know what else they need to move forward with a lending package.

They will consider many pieces of your finances in determining which loans you can qualify to use. Because of the research involved, the loan application process takes time. The more prepared you are with documents, the quicker it can move forward. Ask the lending company about their typical turn-around time before making your decision to use them.

At TwinCity Lending, we make sure you know exactly which documents you need, such as W2s and pay stubs. When you have those ready to go, we can close in two weeks.

4. What are the total closing costs?

This question is critical so that you have no surprises when it is time to sign all the papers. These are costs that are part of the loan application process and include things like title searches and recording fees. The charges can be between 2% to 5% of the total loan amount.

Ask your lender right away what the total closing costs will be. They can help you determine whether it would be better for you to pay the costs up front, or finance them as part of your loan.

5. What’s the down payment requirement?

Your home loan down payment is a percentage of the property’s purchase price. It gives you some immediate equity in the home and affects the amount of the loan you receive.

Most down payments fall between 5% and 20%. The amount you put down on the property affects the interest rate charged on your home loan. A higher down payment leads to a lower interest rate and vice versa.

Ask your lender if you’ll have to obtain private mortgage insurance (PMI). Generally, you need to carry PMI if your down payment is less than 20%.

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6. What could delay the closing?

Lenders need enormous amounts of information to proceed to closing day. Anything that slows down their ability to process the data could delay the funding of the loan.

To keep the process moving quickly, be sure to do the following three things:

1. Sign all documents from the lender and real estate agent as soon as possible.
2. Be flexible in your schedule to ensure inspections and appraisals happen promptly.
3. Gather and forward requested documents to the lender right away.

7. What’s the interest rate?

Home mortgage rates are based on the rate set by the Federal Reserve. But your down payment and credit score also will impact the final rate a lender can offer you.

8. What types of loans are available?

Talk with your lender to determine which loan package is right for you.

VA Loans: Are you or have you been a member of the military? If so, you may be eligible for a VA home loan with no down payment.

Fixed vs. Adjustable-Rate Loans: Fixed-rate mortgages have an interest rate that does not change during the life of the loan. Interest rates on adjustable-rate loans will fluctuate.

Conventional Loans: These home loans, classified as either conforming or non-conforming, are not subject to tax by the federal government.

There may be even more loan packages that would work for your situation. Check in with your lender to make sure you choose the best option.

9. How much house can I buy?

During the pre-approval part of the process, your lending company will give you an estimate of how much you can borrow based on your credit score, available down payment, and the loan-to-value ratio.

10. Do you do a hard credit check?

A hard credit check is when a creditor or lending company thoroughly dissects your profile and credit history. Unlike a soft pull of your credit, this can impact your credit score if it happens too frequently in a short time.

A hard credit check answers all kinds of interesting questions about your credit history, so it’s a good idea to prepare for a thorough examination. If possible, get your credit report ahead of time so that you can clean up any mistakes or problems on there before applying for your home loan.

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Ask the Experts

Are you ready to get into your dream home? TwinCity Lending is here to help you acquire the perfect mortgage package for your needs. We will walk with you each step of the way.

Contact us today to get started.

Use Your Home to Pay Off School Loans

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Student Loan

Do you have undergraduate or grad school loans looming over you, creating a nerve-wracking task of repayment? Consider using a home equity loan to pay them off. People’s home equity can be a powerful tool. However, to ensure you get it right, it’s essential to understand the process.

TwinCity Lending has home equity loan packages that may make it easier for you to pay off your school loans. Your property can be a powerful ally for you as you work to get out from under the burden of student debt. Here’s what you need to know.

Options for Leveraging Home Equity

If you are a homeowner in need of financing to help you achieve your goals, you may want to leverage the following home equity financial tools:

Home Equity Loans (HELOANS)

These loans require a borrower to use their home equity as security and to repay the loan over a fixed period. This type of loan is similar to a mortgage. To determine your home equity loan limit, lenders check your income and credit history, and the loan-to-value ratio. You receive the money in a lump sum, usually at a fixed interest rate. You make payments each month until you pay the loan in full.

Home Equity Line of Credit (HELOC)

A HELOC is similar to a home equity loan in that it relies on the equity in your home to secure the financing. Unlike home equity loans, HELOCs are more like a credit card. You have a sum of money you can access as needed.

You repay based on the amount you have used from the line of credit. These types of financing generally have variable interest rates. As with any home loan, lenders consider your property value, debt, and income before issuing credit.

Which Option Is Better to Pay Off School Loans?

While both choices rely on the equity built up in your home, there are three key differences to consider.

1. Interest rate: In a home equity loan, the interest rate is fixed. You’re expected to pay the same amount each month until you repay the loan. This type of loan is basically like having a second mortgage on the property. HELOC interest rates are variable and depend on the prime rate set by the Federal Reserve.2. Distribution method: A HELOC allows you to take the amount that you need from the available equity. You do not have to draw the full amount at once. Generally, a HELOC stays open for about ten years, although some lenders set different time frames. Home equity loans, on the other hand, come to you in one lump sum.

3. Best use: HELOCs generally work best for ongoing or recurring needs such as tuition or for home improvement projects where you aren’t sure of the exact cost. A home equity loan tends to be the right choice for big-ticket items and needs that are a fixed cost, such as consolidating debt or paying off student loans.

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How Much Home Equity Can You Borrow?

Apart from your credit score, lenders calculate the amount of home equity loan you can take based on your loan-to-value ratio. This combination also determines the interest rate on the loan.

An LTV ratio is an assessment of risk your lenders check before approving your loan request. If your home’s value is at $500,000 with a mortgage of $200,000, then your home equity is $300,000. This formula gives you an LTV of 40%. That is, 40% of your home’s value is held in a loan with the remaining 60% representing your equity.

The acceptable loan-to-value ratio often depends on the lender but can be up to 90% based on your credit score. TwinCity Lending can help you determine the amount of loan you may be eligible to secure.

Paying off Student Loans Is Simple as 1 – 2 – 3

Follow these steps to use your home equity to be free of your student loans:

1. Secure your home equity product. Reach out to TwinCity Lending today to discuss the best option for your needs. Our expert team will guide you through the application process to make sure everything moves smoothly to help you reach your goals.

2. Request your student loan payoff amount. Check-in with your lender to find out the exact balance due to pay off your student loan. Be sure to keep payments current while waiting for your home equity product to fund.

3. Submit your payment and become student loan-free. Once you have the cash available from your home equity loan or line of credit, send your final payment to the lender. After the payment clears, request a statement or letter showing that there is no balance remaining. Keep this with your records.

Benefits of Using Home Equity to Pay Off School Loans

May have a lower interest rate – Many borrowers find that they can secure a better interest rate with a home equity product than they receive with a student loan. Lower rates mean you can enjoy a lower monthly amount or repay the amount more quickly.

You access large sums of money – Depending on the equity you have in your home, you could do more than pay off student debt. You may receive enough to pay off your undergrad or grad school loans and still have money left over for other needs.

Use the power of your home – Historically, real estate is a solid investment that grows in value. Using the equity in your house for big-ticket items is a great way to utilize your wealth as you continue building more equity.

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TwinCity Lending Can Get You There

Repaying your school loans can feel overwhelming and discouraging. However, if you own a home, you likely have the power to erase your student debt. By securing a home equity loan or line of credit, you can use your home’s value to give you peace of mind and keep you on the path toward building wealth.

If you’re ready to tackle your student loans, we have your back. TwinCity Lending is your go-to mortgage company for all your home lending needs. Contact us today.

Are You Watching the Housing Market Too Intensely? 4 Reasons Why You May Want to Stop

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Homes

More than ten years after the housing market crash of 2008, many still harbor worries about owning real estate again. Some experts say that the housing market has reached its post-bubble peak. It’s understandable that many people are watching housing market trends intensely.

At TwinCity Lending , we know that the decision to buy or sell property can be nerve-wracking. You can rely on us to make this process work for you. We are your expert mortgage team, and we have you covered even in a turbulent market. Give us a call to discuss your lending needs.

Housing Market Basics

Although the actual workings of the real estate market are complex, the core system is quite simple. The housing market is what came about after the time of lords and ladies, during the industrial revolution, as people began buying and selling property. Just as with all commerce, housing relies on someone wanting to sell and someone wanting to buy.

Buyer’s Market

A buyer’s market comes about when there are more properties for sale than there are buyers ready to purchase. This market gives the buyer a lot of choice and time to consider many options. It also puts them in an excellent position to negotiate a lower sale price. In essence, sellers are competing against each other to woo a willing buyer. Homes may go unsold for more extended periods during a buyer’s market.

Seller’s Market

Surprising no one, a seller’s market is the exact opposite. There are more buyers than there are houses available for purchase. In this case, the seller has the upper hand in a transaction. They can ask a higher price and may even benefit from a bidding war among prospective buyers. Days on the market often are minimal in this situation.

Balanced Market

When the housing industry experiences a balanced market, there is about three to six months’ worth of inventory listed. This situation is ideal and often happens in the time between the buyer’s and seller’s markets. A balanced period of sales often is relatively short compared to the other two.

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Is It Time to Give Your Market Watch a Break?

For a lot of people, it can be helpful and exciting to keep close tabs on the housing market news. They enjoy the daily updates on trends, interest rates, and other data. Some watch the market only out of curiosity. But most watch the market to help them determine a good time to buy or sell.

But is it possible to pay attention too closely? Probably. Here are four reasons you may want to take a break for a while.

1. You may be ignoring historical data.

As market watchers focus on every nuance of the rise and fall of property values, they can lose sight of historical trends. Daily looks at the housing market news only provide snapshots of the market.

To make the most informed decisions possible, you also need a long-term view. What has the market done historically over the past five years? The past decade? Even longer? Overall, owning real estate has proven to be a consistent, successful way to build wealth. Getting bogged down in the daily ups and downs can paralyze you from making a decision.

2. You may be relying too much on the fed’s movement.

Interest rates matter. Yes. No one can deny that. But basing all of your property buying and selling decisions on the movement of the Federal Reserve isn’t necessarily the best plan of attack.

Small rises in the interest rate do not add a significant amount to the total repayment amount of the mortgage. The difference is more evident in the monthly payment, and this is what can give some people a reason to pause.

But it still is a good idea to take a broad, long-term view as much as possible. Motivated buyers will be ready to purchase even when they see slight interest rate changes.

So don’t let the fed’s movement dictate all of your real estate decisions. Reach out to the experts at TwinCity Lending to see how rate fluctuations will impact your potential property purchase.

3. You may be looking too closely at national data rather than local trends.

Real estate is a highly localized commodity. Most housing market news focuses on national trends, but this does not give you the information you need to make decisions in your market. How hot or cool the market is in San Francisco doesn’t help you if you need to buy or sell in San Antonio.

And even within one city, there can be drastic differences in the market. Changes in urban growth boundaries, the influx of new industry, and school rankings all can impact the hyper-local real estate trends. If you want to be a market watcher, try to keep it local.

4. You may experience decision paralysis

Let’s face it. You could spend every day of your life poring over real estate and housing market trends. You could learn every nuance of how the fed makes its rate decisions.

You could have notifications alerting you to any change, up or down, in the market. You can watch housing prices around town and around the country and wonder if it’s the right time to make a move or to jump into the world of real estate ownership.

But at some point, focusing solely on the data could paralyze your decision-making abilities. With so much information coming at you, you run the risk of never getting to the point where you feel confident choosing to buy or sell.

If you don’t ever allow yourself to go for it, then what is the use in spending all that effort paying attention to trends? Eventually, it’s ok to jump on in.

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TwinCity Is On Your Side

Whether you are a watcher or are ready to take the leap into buying, the concierge lending team at TwinCity Lending is here to help. We are your go-to experts for home loans, VA loans, refinances, and reverse mortgages. We have the knowledge and compassion to make your lending experience perfect.

Reach out to our team today so you can start your real estate adventure.

Use Your Home Equity to Pay Off Your High Interest Credit Cards

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If you are motivated to pay off your high-interest credit cards or other debt, you’re not alone. Fortunately, there is a way to generate additional income to pay off your debt with something you already have–your home equity.

Because home equity loans are secured loans (credit cards are unsecured), they almost always offer much lower interest rates. This lower interest rate will lower your monthly minimum debt payments significantly.

Find out more about utilizing your home equity to pay off debt with TwinCity Lending here.

In this article, we will discuss three ways to use your home equity to free yourself from debt.

Option #1: Refinance Your Mortgage Loan

Refinancing a mortgage loan is an excellent way to drastically reduce your monthly debt payment while slashing the often high-interest rates credit cards charge.

In 2018, the average interest rate of new credit card offers was 16.73%. Contrast that with the average 30-year fixed mortgage refinance rate, which was 4.52%.

There are several other factors to consider, including the additional length of the mortgage loan. However, you stand to cut your monthly debt payments by a sizeable amount instantly with this option.

You likely will not know the precise terms of your refinancing loan until you start applying. You can, however, estimate the benefit of refinancing based on:

  • Approximate closing costs.
  • Your home’s value.
  • How your credit-worthiness will affect a change in the loan’s terms.

Many easily accessible mortgage refinance calculators will help you figure out when the savings will surpass the costs. This break-even point is one of the most important things to consider.

How it compares to how many years you plan on staying in your home is very important.

To calculate your break-even point, divide your total costs my month-over-month savings. The result equals the number of months required before the savings surpass your refinancing costs.

Option #2: Home Equity Loan

House Key

Ever since taking out your first credit card, you probably had dreams of owning your own home. Now that you do own your house, you can use its equity to pay off some of your high-interest cards, and other debt.

home equity loan has an advantageous interest rate for the duration of the loan. It is a fixed interest rate, and you will have the opportunity to free up extra cash to pay off debt every month.


Other advantages include:

  • Fewer upfront fees compared to refinancing the mortgage loan
  • No paying extra to pay the loan off (no early pre-payment penalty)
  • Tax deductible

Remember, because it is a secured loan, a home equity loan will almost always offer a much lower interest rate.

Interest on a mortgage is tax deductible. In general, you can claim interest paid on your home equity loan in the same manner you do on your original mortgage. Compare this to other loans, which include no tax advantages.

Thus, the more your mortgage interest is, the more you may deduct from your taxes. Therefore, this type of loan can be very advantageous when used to pay off high-interest loans. A car loan would be one example of this.

So that they are competitive with other kinds of loans, home equity loans present many advantages. For example, a home equity loan typically carries a fixed interest rate and a set monthly payment. This monthly payment never changes.

You can often choose the length of the loan term, which will lower or raise your monthly payment accordingly.

In some cases, lenders offer adjustable-rate home equity loans. With these, interest rates may go up or down, fluctuating your monthly payment. The fluctuation is dependent on the national prime interest rate.

So if you are interested in paying off your debt, why choose an adjustable-rate home equity loan? These loans often start at a lower interest rate, thus freeing up more cash flow to address your debt at a lower interest rate.

However, keep in mind the interest rate can increase at any time, thus increasing your monthly payment.

Option #3: Home Equity Line Of Credit (HELOC)

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Taking out a line of credit with your home equity is the most flexible option. You will be approved for the entire amount of equity, but you will only be charged interest on what you use.

Additionally, whatever you money you pack back will again become available for you to borrow from.

Just like a home equity loan, interest rates on a home equity line of credit are usually low.

This will free up liquid assets for you each month to pay off any outstanding debt you may have. Better yet, you can take out a line of credit of any amount up to your total home equity value.

The flexibility of a home equity line of credit (HELOC) makes it an appealing choice for paying off debt. Some more benefits:

  • They are 100% liquid, as good as cash in the bank.
  • They are often eligible as forms of down payment.
  • Relatively inexpensive compared to a home equity loan.

How Home Equity Loans Affect Your Credit Score

Another advantage of home equity loans is the positive impact it will have on your credit score. Your credit card accounts carrying balances will now have fully-available credit limits.

Because of this, your debt-to-income ratio is significantly lowered. Because this ratio represents a third of your credit, your credit score will rise quickly with this reduction in credit card debt.

The Importance Of Selecting The Right Mortgage Lender

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Taking out a home equity loan to pay off your debt can be a great strategy. However, not all mortgage lenders have your best interests at heart. It is important to discuss the decision with your family and pick a lender who is right for you.

Refinancing your mortgage offers many benefits, including reducing your interest rate and monthly payment. It also can allow you to extract cash from the equity you’ve generated on your home.

TwinCity Lending is Minnesota’s premier mortgage company and takes pride in offering the best home equity loan rates. Learn more and get a free mortgage review today.

Vital Home Maintenance: Protecting Your Investment

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Tools

Your home is potentially the most important investment you’ll ever have. Keeping your investment in tip-top shape helps it to maintain or even increase its value over time.

If you’re like most homeowners, you might imagine that home maintenance equals thousands of dollars of expenses going into a new roof, water heater, or massive kitchen and bath renovations.

We’re here to let you know that maintaining your home is easier than you think. We’ve got several items for your maintenance checklist that you can mark off on your own. Read on for all the details.

From the best interest rates to professional and trustworthy customer service, TwinCity Lending is your go-to lender from pre-approval to closing. Call us today and speak with one of our lending specialists about your new home loan or refinance.

Start by Checking Your Home at the Top

Roof

We suggest you take a good look at your roof first. Every season, be sure to stay on top of curled shingles, missing shingles, old or worn-looking sections of your roof.

Clear away sticks or branches–they encourage pests to hop a ride onto your structure.

Some minor roof repairs are easy to manage on your own; others may involve calling in a professional. If you don’t know what’s up there, though, a small problem can become a catastrophe surprisingly fast.

Next, check the attic. Your insulation should be fluffy and functional, with a proper R-value (the rating that measures the efficiency of your insulation.)

As a rule of thumb, you should not be able to see the joists beneath the padding. This rating typically equates to about 10-14 inches of material.

If you’re running a little low, you can add new loose insulation (the kind you blow in) over the old material, as long as there is no plastic barrier of any kind between the two different elements.

If you determine you need more insulation, it may be best to call a professional to do the job safely.

Also, having a good look around the attic will give you a chance to check for pests like bats, squirrels, or bug damage to your wood beams.

If you notice the signs of critters, call a pest removal service to help you determine where the access points are, and to remove any unwanted guests.

Spotlight on the Exterior

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Now, carefully inspect the outside of your home. Are there siding cracks or missing panels? Are your gutters in good shape? What about the seals around your door and window frames?

If you’re noticing a few trouble spots, you might consider getting an Energy Audit from your local power company. There are also many independent vendors that perform this service for their would-be customers.

You can schedule an energy audit in most regions for low to no cost, depending on the provider. Try a Google search for “energy audit near me,” and you’ll have a straightforward list of resources at your fingertips.

Basements are Always Interesting

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Basements have the potential to be maintenance “hot spots,” depending on the age of your home, your region, and your weather patterns.

In the basement, keep an eye out for the following:

  • Small patches of moisture, especially around the seams in the foundation
  • Bugs of any kind, like spiders in large numbers, silverfish, roly-poly worms, or centipedes.
  • Drainage problems
  • Sump pump function–test and inspect often
  • Water heater corrosion on the bottom panel
  • Washing machine hose connections and drainage
  • Water softener age and function
  • Water pressure gauges (extensively high water pressure puts extra wear and tear on your appliances and pipes, not to mention wasting water and adding to your bill. Check your water pressure periodically with water faucet pressure gauge to be sure you’re staying in the “safe” zone.)
  • Water heater temperature. A setting of 120 degrees is the most energy efficient.
  • Age and efficiency of furnace and whole-home air conditioning systems
  • Dirty air filters in the HVAC. Change them every couple of months.
  • Adequate pipe insulation, especially in crawl-spaces, to prevent pipes freezing and cracking.

Some basement issues, like high water pressure, air filter replacement, and rock salt for your water softener, are easily monitored or repaired on your own.

When you notice small issues becoming bigger, get a repair estimate right away from two or three service providers. It’s vital to have someone you can trust for preventative solutions as well as emergency repairs on speed dial.

Strategize Larger Repairs and Updates

Remodeling Home

When you know you have a substantial repair project or a cosmetic update you want to add to your home, plan for it in advance.

Roofs, kitchens, and bathrooms are typically among the higher-cost projects in the general homeowner maintenance plan. However, appliances and exterior work can also tend to “break the bank,” especially when emergencies happen.

When your spot-fixes are no longer enough to solve the issue, begin planning and saving for replacement or renovation. Tackling one large project per year is a place to start your strategy.

Are your bathroom grout, household flooring choice, and seam caulking getting on your last nerve already? Begin now to craft your repair or renovation budget with estimates and materials planning.

You’ll want a clear picture of how your strategic plan can help you save on future maintenance. It pays to spend a little more upfront on higher quality appliances and materials if it saves you time, money, and trouble later on.

Save up the money you’ll need over several months, and then pull the trigger on your project without plunging into debt, or worse yet, getting caught in a nasty surprise when the shower breaks or the floor joists are rotten with moisture.

When you stay on top of your small home maintenance repairs, they are less likely to become huge, expensive, disasters.

At TwinCity Lending, we’re here to help you keep your investment in prime condition for as long as you own your home or rental property. Call us today for more information on our new home loanshome refinance, and home equity products. Let’s build your wealth and keep it valuable together.

Need a Safe Place to Park? Try a 10-Year Bond

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Money

Bear market. Bull market. Trade tariffs, a tumultuous real estate market, buyer panic, buyer confidence. How does a novice investor make smart choices for growing money in the economic times we are all currently facing?

When you’ve made a little money (well done you, you hard worker) and you want to see it grow, making sound investment decisions today for a financially secure future can be confusing at best and confounding at worst.

Today, we’re going to talk about investing in bonds that can help you modestly grow your money while you gain more confidence in your market knowledge. As you learn more about all your choices for investment, you can begin to make sense of all the ways your nest egg can increase as well as the level of risk or commitment present in each investment choice you make.

At Twin Cities Lending, we’re here to help you with all your home financing needs. Call our team for a free mortgage review today.

What are government bonds?

A bond is a way for our government to fund itself from investment from both domestic and foreign investors. Bonds are a low-risk investment, which means that you are very likely to get back what you paid in, and sometimes extra in the form of interest.

There are several different types of government bonds that are selling today. They are:

  • Treasury Bonds: A long-term investment bond, with maturity, dates at 30 years from the date of purchase, this means that you get the full amount of your investment back, plus some interest 30 years after you purchase the bond. Payments on your bond from the government are issues twice per year until the bond maturity date.
  • Treasury Bills (T-bills): These are short-term investment bonds, with a maturity date of up to a year from the date of purchase. The securities get sold at discounts to their face value (similar to seasonal sales at a retail store) T-bills mature between four and fifty-two weeks and pay you the face value of the bond.
  • Treasury Notes (T-notes): T-notes are mid-term securities that mature in two, three, five, seven, or 10 years. The government makes “payments” on these T-notes twice per year, which includes a bit of interest over the life of the note. Interestingly, T-note rates of return are used in the financial world as a benchmark for other markers like mortgage interest rates as well.

In Short Term Investments, Flexibility is Essential

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When looking for a “parking spot” for your money while you make more significant decisions, it’s paramount to have as much flexibility as you can leverage. Ten-year T-notes are a flexible investment option that allows you a lot of choice about when and how to move your money around, should you choose to do so.

Once you purchase a T-note, you could hold onto it for the entire term of the bond, in this example, that’s ten years. If you decide you need the cash or want to change your investing strategy, you can sell the T-notes early on the secondary market before the maturity date.

The Tax Man Cometh, but Not as Much for T-notes

Whenever you decide to invest, you must be familiar with the tax implications of every financial move you make to place yourself in the best position for the growth of your capital.

Ten year Treasury Notes are a great purchase in part because local or state governments do not tax the interest earned from T-notes. That means the money you invest in T-notes can grow without the shadow of taxation down the road as the treasury yield curve on this type of bond builds.

(Check in with your accountant for information on how T-note interest income may be taxed federally, though.)

T-Notes are Easy to Buy

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Many hard-working Americans think they have to have thousands or even millions of dollars to be an active investor and build wealth, but this is not true with T-bills. You can purchase them online at the U.S. Treasury website, or directly through a broker or a bank with a minimum investment of $100. Start with buying a bunch of bonds or just a few in $100 increments.

You could begin to build your money a little at a time by setting aside $100 each month to purchase T-notes if you so desired, which incidentally, could be a great way to build up a sizeable down-payment on your first, or next, home purchase.

Putting money aside into a short-term, low-risk investment like T-notes can help you feel you are progressing toward greater wealth. The money you put away is still very accessible, but also just enough removed from you that you are not tempted to spend your pile of cash before you get to your goal.

Every investment has Risk; be a Smart Shopper

While government bonds held to maturity are guaranteed to collect interest and a full return of initial investment, bond purchasers could experience a loss when selling a T-note before it’s maturity date.

Though bond investment has historically been considered a very safe investment option, interest rates are still subject to market fluctuations. Selling a bond early at a lower yield than when you purchased it means that your capital could reduce a bit.

Talk to your broker or a fiduciary financial advisor (“fiduciary” means the person you work with must advise you based on your best interests, not theirs) to make the best decision for your current financial goals.

If you plan to make a larger purchase relatively quickly (like a home) with the money you’ve placed in T-notes, a shorter term bond may make more sense for you than a longer-term note.

Finally, when it comes to saving money and growing your financial power, you are the best judge of what is right. Take time to evaluate your investment options, consult experts you trust, and make the decisions that fit for your future savings goals as well as your immediate larger purchase desires.

At TwinCity Lending, we are here to help you secure the mortgage product that is a fit for your best future financial outcome. We are proud to offer ethical and friendly service to all our local customers and to provide timely education on financial matters, so you feel confident in the “money” driver’s seat.  Come see us today and let us help you land the home of your dreams!

Quantitative Easing and House Interest Rates

Quantitative Easing

Quantitative Easing

Buying a home is a big deal whether you are doing it for the first time or the twentieth, and if it’s your twentieth home purchase, we want to know your secret. We should all be drinking some of what you are! There are at least a million (it seems) factors that influence your house interest rate, and rates can change daily.

Read below to learn more about a financial climate called Quantitative Easing and what you should know when buying your next home.

At TwinCity Lending, we want to take the guesswork out of all your major financial decisions. Schedule an appointment today with one of our lending specialists today to find out how much buying power you have in today’s home market.

What is Quantitative Easing?

Quantitative easing is a tool that governments can and have used to assist their country in getting back on its feet after a significant downturn in the economy. It is a controversial decision and has historically been used as a “last resort” to avoid deep economic depression.

The goal of quantitative easing is to provide short-term economic stimulus via lower interest rates and raise money supply.  In the U.S., quantitative easing has been used three times in our history.

The principle of quantitative easing is to flood the economy with money.  This flood happens when the federal reserve increases its printing of new money to get central banks to purchase government treasuries.

This ramp-up in government-backed treasuries helps banks to have more money to lend.  With increase money “supply,” the “cost” of capital (federal interest rates) reduces to encourage more borrowing by the public, and in turn, more spending by the public. Hence, a short-term boost to the economy.

QE can be a slippery slope.

SEO

Even though QE provides short-term relief for dire economic circumstances like the 2009 market crash and homeowner crisis, many believe the long term risks of QE outweigh the benefits.

In the US, we are currently in a period of QE.  It is a grand experiment, truly. While we have seen encouraging economic recovery nationwide since the financial crisis of 2009, the long-term benefits and consequences of using QE remain to be seen.

Some possible long term “side effects” of employing QE include:

A negative impact on the global economy.

Inflation goes up when the extra money supply causes the prices of goods to rise disproportionately.

The strength of the U.S Dollar is threatened comparatively with other countries.

When QE is removed or suspended (remember, QE is a “last resort” option in tough economic times), economic growth can stall or even reverse.

QE encourages both businesses and individuals to take on more debt

How can you be smart about home buying during QE?

Chating

It’s no joke that knowledge is power.  By leveraging your knowledge of QE with your understanding of personal finance, you could come out a real winner as a homeowner during a period of QE. Here’s what we mean.

When QE is enacted, federal interest rates generally fall, or they may already be lower, as was the case in 2009. In our present economic climate, interest rates are currently as low as 3.15% fixed  (meaning this rate is locked in for the duration of the loan) on a 15-year mortgage. Be sure to check with us at TwinCity Lending frequently, as interest rates can fluctuate, and each day may be a little different.

Because money is so “cheap” right now, it can be tempting to buy a little more house than you would generally consider because the mortgage payments could be seen as “doable” in your household budget. Here’s what we suggest for home buying that is not only celebratory at the close of the sale, but will keep you stress-free for the duration of your mortgage.

Take a careful look at your take-home income. Your total mortgage payment, including taxes, insurance, and homeowners association fees, should total no more than 28% of your income after taxes.

Lower your consumer debt. Begin now to pay off other loans like student debt, credit cards, or car notes. Eliminating even one monthly payment means, even more, buying power can go into your home, especially if the home you choose may need some repairs or updates.

Get a home inspection. When shopping for your next home, a qualified home inspection is essential to increasing your peace of mind and preparing for the many extra expenses that home-ownership brings. Pay extra attention to the age and condition of the roof, the state of the foundation and basement, as well as major appliances like water heaters and HVAC which are among the most expensive to repair or replace for homeowners.

Make a significant down payment. When money is cheap like it is now, it can be tempting to purchase more house with less of a down payment; financing as much of the purchase price as the lender will allow.

Paying as much as you can in a down-payment will assist you in building home equity right away, as well as lowering your mortgage payment. A significant down-payment (20% or more of the asking price) may potentially eliminate the need for mortgage insurance as well.

Create a Home Emergency Fund. Begin immediately to fund a savings account for both emergency repairs or replacement, as well as planned large expenses like roof replacement or kitchen/bath updates.

In the end, Quantitative Easement periods can give homebuyers an edge with low-interest rates. The vital key to being a stress-free homeowner is to not “go wild” with your home purchase so that you paint yourself into a corner later by taking on too much debt in a changing economy.

When searching for your next home, use your common sense, keep your overall debt low, and be honest about your behavior around debt and spending. Don’t forget to call on professionals for help like our team at  TwinCity Lending.

Schedule a consult with us today and let us help you land great home in which you can truly relax because you know you made the best decision.

First Time Home Buyer Grants: What They Are and How to Get One

First Time Buyer

First Time Buyer

Shopping for the home is the fun part, especially if you have never owned your home before. Maybe you have spent years looking and dreaming, wondering when it will be your turn to own your home. If you take advantage of one of the many first time home buyer programs out there, you may be able to take that leap sooner than you think.

Shopping for the home might be the fun part for you, but financing your home is the fun part for us. We love to hand people their dreams. Let TwinCity Lending help you look through your financing options, and help you decide which programs are right for you.

FHA Loans

  • The Federal Housing Authority is part of the Federal Department of Housing and Urban Development. HUD offers multiple educational programs, grants, and loan assistance to help get you in your first home. An FHA loan is a mortgage loan that is insured by the Federal Housing Authority so that the lender can offer more flexible terms than a conventional loan. FHA loans only require 3.5% down, which can make entering the market possible when you have not had the chance to stock away the cash required for most conventional loan down payments.

To qualify for an FHA loan, you will need:  

A credit score of at least 580 (for a loan with a 3.5% down payment)

A credit score between 500 and 579 (if you have a 10% down payment)

Debt to income ratio of 46% (we can help you figure this out – call us at 651-303-4236)

Mortgage insurance in addition to your monthly mortgage payment

An appraisal from on FHA approved appraisal company

Documentation that you have had a steady income for the last two years

You must be 18 years old

To live in the home you are purchasing

203k Rehab Loan

If you are looking to buy a fixer-upper, this FHA loan covers your mortgage and gives you cash to turn your property into your dream home. The requirements are similar to the FHA loan, but you will need a higher credit score.

Conventional 97% LTV, 3% Down program

Money

Fannie Mae and Freddie Mac created a program to offer an alternative to the FHA loan. Since the hardest part of buying a home is finding the down payment, they started offering a loan program that requires only 3% down. The debt-to-income ratio requirement is not as easy to achieve as an FHA loan, and the credit score requirement is higher. But you could save more up-front by putting 3% down with the conventional loan vs. 3.5% with the FHA loan.

Requirements of the Conventional 97 loan:

Debt-to-income of 41% or lower

$424,100 Maximum loan limit

Minimum credit score requirement of 620

One borrower must not have owned in the last 36 months.

PUD, condo, co-op, and single family homes are all eligible.

Like FHA, the borrower must occupy the home.

Start-Up for First-Time Home-buyers

Minnesota Housing, the state’s housing finance agency, can help you get into your first home.

Their start-up program offers:

Low, fixed interest rates for the life of the loan

As little as 3% down

Down payment and closing cost loans – up to $15,000

Low or no mortgage insurance

This program is offered only in Minnesota, so it is worth a look if you’re planning to buy a house on this side of the river.

USDA Loan Programs

The U.S. Department of Agriculture offers home loans with zero down payment for homes in qualifying areas. The idea is to celebrate rural America, and take care of the homes that have a little more wide open space around them. If you are considering a move to the country, see if the properties you are looking at qualify. We can walk you through the process, as well, if you give us a call at 651-303-4236.

HomeReady HomePath Mortgage

Mover & Packers

HomePath is a program offered by Fannie Mae that sells the homes they own. The properties are “real estate owned,” and have returned to the lender from their previous owner, so the homes often need some TLC and financial investment. Fannie Mae offers loans with a down payment as low as 3% but waives the mortgage insurance usually required with such a minimal down payment. Also, if you complete their free ReadyBuyer™ course, they offer up to 3% closing cost assistance as well.

HUD’s Special Home Buying Programs

Good Neighbor Next Door

HUD has designated particular neighborhoods as “revitalization areas,” places they want good neighbors to move in. Law enforcement officers, teachers, firefighters, and emergency medical technicians can qualify to buy a home in one of these areas for up to 50% off the list price. They commit to living in the residence for 36 months.

Homeownership for Public Housing Residents

If you are living in public housing and currently renting, HUD offers a program to help you purchase your home.

Indian Home Loan Guarantee Program

Also known as a section 184 loan, HUD offers special assistance to Native Americans to help them obtain a mortgage.

HUD Dollar Home Program

If a foreclosed FHA home has been on the HUD website for more than six months, HUD can offer it to low-income home-buyers to help revitalize the community.

VA Loans

Active military and veterans can buy a home with no down payment and no mortgage insurance, making a VA loan the best option for anyone qualified.

Adapted Housing Grant: Veterans can also get an Adapted Housing Grant to help make their home accommodate their active duty injury.

We Can Help

If you’re not sure which program or loan type is the right one for you, let TwinCity Lending help you walk through your options. We would love to get to know you well so we can tailor your financing to your particular situation, and make sure you are taking advantage of all the right programs. And please forgive us if it looks like we’re having fun while we do it.

Cash Out Refinance on Your Investment Property

Cash Out

TwinCity Lending can help you WIN at investment property ownership with a cash-out refinance loan

Cash Out

Congratulations on doing a little winning at life, all of you investment property owners out there!  We at TwinCity Lending know it frequently takes a lot of blood, sweat, and tears to make investment property ownership a reality. Regardless of how you came into ownership of this type of home or building, we want to make sure you know how to keep growing your footprint as a landlord or keep your investment property in tip-top shape with our cash out refinance options.

What is a Cash-Out Refinance Loan?

Very simply stated, a cash-out refinance is a way to unlock the cash you have sitting in equity in your investment property. If you have 30-40% of your existing investment loan paid off, or if your property has gone up significantly in value in the last several years, you may want to consider taking out a new loan at a higher principle than your existing mortgage. Then, you can use the difference as cash-on-hand for any number of growth or maintenance objectives.

For example, let’s say your property’s fair market value amount is $175,000.00. For a cash-out refinance loan to make sense as an investor, your principal loan balance needs to be $122,500.00 or lower (loan-to-value). We arrive at this total by the equation:

($175,000.00 Fair Market Value) x (.75 Loan-to-Value) = 122,500.00

Once you complete your cash-out finance loan, you can take the amount of the cash-out loan and pay off the existing mortgage ($122,500.00) and then have $52,500.00 left over to spend!

How do I manage the risk of a cash-out refinance loan?

Refinance

Remember,  you still will have a “mortgage” on the first property that you will pay down incrementally after your cash-out refinance. Further, the principle will be a bit higher than your original loan because you are trying to “liquify” your property’s equity. It is paramount to have a long look at both your existing financial resources and your growth and investment goals before you make this decision.

For example, if you have a great deal of experience flipping properties and have had successful renovating and selling experiences in the past, a cash-out refinance may feel like a reasonable risk.

Also, if you have reliable renters in place and a solid lease on an existing property that can place you in more confidence as you refinance with cash out. If you believe that renovating your property will cement your renter relationship for a long time to come or make the property more attractive to potential renters, the risk of refinancing may seem like a safer bet.

In any case, it is always wise to cover your “risk” bases before moving forward on any refinance.  If the refinance is to serve as a “band-aid” for a more significant financial issue, it may be a good idea to put the decision on hold until you feel more comfortable with the risk you are assuming in this transaction.

Who can benefit from a cash-out refinance loan?

Investment property owners with a minimum of 30% equity in their property stand to gain the most “flexibility” from this type of loan. Property owners with less than 30% equity may also be able to use a cash-out refinance loan to lock in a lower interest rate, saving hundreds or even thousands of dollars in interest payments over the life of the loan.

Are you one of the following people? If so, a cash-out refinance loan could be a smart way to grow your portfolio:

  • Short-term flippers or fixers: You are looking to buy a house, fix it, and sell it at a profit
  • Long-term buyers and holders: You want to buy a house and keep it, typically with an all-cash offer or big cash down payment.
  • Long-term buyers and holders: You already own a property but need to repair or update it.

How can I use my “liquid” equity?

Equity

Technically, you could use the money for whatever you want, like a vacation or a new car.  However, savvy investment property owners will often spend their liquid equity on one or more of the following:

  • A down-payment on another investment property
  • Improvements to an existing property, which may increase the property’s market value or enable the owner to increase lease revenues
  • Costs of “flipping” investment properties for higher potential return on investment

The key with using the money from this type of loan is to grow as an owner in some way, either by improving your current property or by adding more properties to your portfolio for lease or “flipping” potential.

How do I start my cash-out refinance loan process?

At TwinCity Lending, we want to make all your loan applications as simple as possible. We have mortgage calculators on our website, and convenient appointments available to answer all your questions. Schedule one here whenever you like!

Before your appointment, please know that you will need to meet a few requirements before beginning the refinance process. Qualifying credit score, fees, closing costs, and other loan terms are all part of the application process. Checking in regularly on your credit score is good general practice, and can help you avoid and credit score “surprises” when applying for cash-out refinance.

Lender fees up to 3% of the loan amount and closing costs and up to 5% of the loan amount are also part of the overall loan process, so factor that into the amount of cash you want to take home from the transaction.

How will I receive my money from a cash-out refinance?

Typically, it takes between 30-45 days for approval on your cash-out refinance application.  Once approved, the payout can usually occur within three days. The cash transaction is made through wire transfer, first to the original lender to pay off the original mortgage, and then the remainder is wired to your bank account. Instead of a wire transfer, the title company will issue the funds with a certified check.

Thank you for trusting TwinCity Lending with your investment property cash-out refinance!  We are proud to help local investors grow their financial impact and investing power with our professional and stress-free service. Call TwinCity Lending today to begin your application.  We’ve got this. After all, helping you grow YOUR business interests is at the very heart of OUR business interest.

Using Your Home Equity to Reduce Your Debt

Debt Management

Debt Management

Sometimes life happens. When you least expect it, a financial need arises that can leave you and your family scrambling. Or perhaps you desperately want to pay down your existing debt. While there are many options to borrow money, some are more costly than they are worth.

If you’re a homeowner, one option at your disposal is a home equity loan. While loans, in general, can be tricky, a home equity loan is an excellent option for many circumstances.

If you are interested in using a home equity loan, call the knowledgeable professionals at TwinCity Lending. We have years of experience working with a variety of customers. We work hard to keep overhead costs down so that we can pass the savings on to you.

What is a Home Equity Loan?

home equity loan, also called a second mortgage or a home equity installment loan, is a way to borrow against the portion of your home’s value that you own. Your available home equity is the difference between the total value of your home and how much you still owe. A homeowner builds equity in their home by making payments on their mortgage, improving the home, and keeping the house as it increases in value.

Homeowners can use home equity loans for many things. Whether you want to remodel part of your house, pay down debts, such as credit cards or student loans, or to make another large purchase, like a car, a home equity loan provides you with available capital. Interest on a home equity loan may be tax-deductible, as well, depending on your circumstances.

Reasons to Use a Home Equity Loan

Shopping Bill

Home equity loans are a fantastic way to obtain money at an affordable interest rate. Many people wonder if you can use a home equity loan for any purpose. The answer is generally yes, but you should take care when borrowing against your home’s equity. Overuse of this type of loan was a leading factor in the Great Recession.

Consolidate Debt

A common reason to take out a home equity loan is to consolidate debt, particularly high-interest debt. Many homeowners still have a significant amount of student loans they are still paying off, or maybe have built up credit card debt. Frequently, these rates can be very high, up to 15-28%.

If you use a home equity loan, you could save yourself thousands of dollars in interest and use those savings to pay down the principal amount. Even though home equity loans typically come with a higher rate than your initial mortgage, they are usually less than double-digit rates attached to credit card debt.

Home Improvements

Another common reason to take out a home equity loan is to make improvements that add value to your home. The increase in your home’s value tends to help you recoup a significant portion of the initial investment in the home improvement.

For example, a reasonable kitchen remodel in line with the value of the home can return about 70% of the investment in the increased value of the house. Upgrading your home’s exterior can add almost 80% of the cost back to your home. Using a home equity loan to make energy-efficient updates to your home will not only add value but also save you money on utilities and, in some cases, give you a tax break

Emergency Expenses

Another common reason to use a home equity loan is for an unforeseen expense. Many families don’t plan for substantial medical costs, job loss, or other situations that require a large amount of capital at once. A home equity loan can give you a significant amount of money to pay for these unexpected events and provide you with peace of mind.

How does a Home Equity Loan Work?

Buy House

You might be wondering how a home equity loan works. You know you can use this loan for several different things, but how? Similar to a first mortgage, a home equity loan is for a specific amount and a fixed rate that is scheduled to be paid back over time. The borrower will get a lump-sum amount with an agreement to make regular payments for a specific time period.

The amount for the loan depends on how much of your mortgage is paid off. The lender will divide the total amount you have left to pay on your mortgage by the value of the property. This amount is the loan-to-value ratio, and generally, lenders want this ratio not to exceed 90% after the new loan is factored in.

To put it in practical terms, if you own a home that is worth $400,000 and you have $200,000 left to pay in your mortgage, you have $200,000 in home equity. If you wanted a lump sum of $100,000, that would be a 75% loan-to-value ratio.

Tips for Home Equity Loans

Use The Money Wisely

While it may be tempting to take out a home equity loan to purchase a nice car, or to complete substantial improvements to your home, you need to be wary of how much you spend. Do not make a large purchase you can’t afford. This may mean using the loan to purchase a reasonable car, rather than a luxury one.

Also, don’t make home improvements you will not recoup when you sell. If you invest $80,000 into a kitchen in a $250,000 home, you will not get that investment back because potential buyers won’t want to spend that much on an updated kitchen that doesn’t match the rest of the house.

Be Aware of Fraud

As with anything in life, there is a potential for fraud with home equity loans. Do not fall for a scam. If the offer seems too good to be true, it might be. The best option is to seek out a reputable mortgage lender, rather than falling for a television ad. Look up the company with the Better Business Bureau, or read their Google reviews.

Thoroughly read through all documents before you sign anything. It is perfectly acceptable to have an attorney read through legal documents before signing. Disreputable lenders have manipulated people into signing over the rights to their house without realizing it.

Call TwinCity Lending Today

If you are interested in a home equity loan, give TwinCity Lending a call today. We specialize in low-interest loans, especially for borrowers with good to excellent credit. Our goal is simple: keep overhead costs down and save our clients money. Find out how we can serve you and your borrowing needs.