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.

Helping Veterans Get homes: Understanding the VA Home Loan

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VA Loan

If you’re a veteran of any of the branches of military service in the US, then you deserve thanks for your years of service to the nation and your willingness to protect our country. You also deserve to capture the dream of home-ownership, and there are several programs in place to ensure that veterans can obtain the home loan they deserve.

At TwinCity Lending, we are proud to have helped many veterans buy a home. We are knowledgeable about the many incentives and programs that will help you get there. Give us a call today, and we will get you qualified for a veterans administration home loan and soon you’ll be flying your flag over the roof of your own home.

What Are VA Loans?

The Department of Veteran’s Affairs guarantees loans to US veterans, but it does not lend the money itself. You can obtain your mortgage through any lender who specializes in VA loans, such as TwinCity Lending. You may have heard of Veterans United Home Loans, which is a mortgage lender who only does loans for vets. While they offer excellent service to help vets buy homes, you can instead choose the lender you prefer to work with for your VA mortgage loan.

There are several benefits to being able to utilize a VA Loan. Most notably, you do not need a down payment to buy a home.

Also, unlike other mortgages which require and charge Primary Mortgage Insurance (PMI) to borrowers who have less than 80 percent equity in the house, VA loans have no PMI. This benefit saves you substantial money every month.

There are no limits to the amount you can borrow with a VA loan, and they have more lenient income, credit, and debt ratio requirements than conventional loans. Plus, they generally have significantly lower interest rates, which saves you more money over the life of your loan and let you potentially pay down your principal more quickly.

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

You can only use VA loans for your primary residence, so you cannot use them to finance a vacation home or a rental property. The benefit is renewable, however, so just because you used a VA loan to purchase a home before doesn’t mean you can’t get another VA loan when you relocate. You can even buy a duplex or multi-unit property with your VA loan and rent them out, as long as you live in one of the units.

How to Get a VA Loan

Buy Home

You need a Certificate of Eligibility (COE) to apply for a VA loan. You are eligible for a COE if you meet one of these conditions:

  • You served 90 consecutive days of active service during wartime;
  • You accumulated 181 days of active service during peacetime;
  • You have been an active member of the National Guard or Reserves for six years or more, or you were called to active duty and served 181 days of active service;
  • You were married to a service member who died in the line of duty or as a result of a service-related disability.

The COE doesn’t mean you will automatically qualify for a VA loan, but it’s the first step. Take your COE to your mortgage lender who offers VA loans, such as TwinCity Lending, and one of their representatives will walk you through the qualification process. You will still need to meet standards for income, credit score, and debt ratios but remember that these are easier to obtain with VA loans than they are for conventional loans.

Qualifying for a VA Loan

You’ll remember that there is no down payment required for a VA loan, but you are welcome to put money down to reduce the amount you are financing. Doing so can lower your monthly payment or allow you to qualify for a house with a higher sales price.

The amount of your down payment also affects your VA Funding Fee. Generally, a higher down payment lowers your fee, as the fee is there to help pay for the program and its risks. Your fee is lower if you make a down payment because your loan is less risky than others.

Let’s examine the VA Funding Fee for a moment. You’ll recall that we said above that VA loans do not require a down payment, nor do they have Private Mortgage Insurance (PMI) that is paid monthly until your loan reaches at least 80 percent of the value of your home. Both of these benefits are substantial and make home buying easier for veterans.

VA loan isn’t wholly without fees, however. All VA loans have a VA Funding Fee, which is assessed when your loan closes. This fee goes directly to the Department of Veteran’s Affairs for the administration of the program, and your mortgage lender cannot waive or alter the funding fee.

You can find the amount of your funding fee on your Certificate of Eligibility (COE) that you get from the VA. The amount you must pay will depend on whether you were active duty or in the Guard, and whether you are using the VA loan benefit for the first time, or subsequently, or for a purchase or a refinance.

Don’t worry though. Just because this fee is due at closing and is required to obtain your loan doesn’t mean that you have to come up with thousands of dollars to purchase a home.  You can ask the seller of the property you wish to purchase to pay the fee on your behalf at closing, or you can also roll the cost of the fee into your loan and pay it over time. Your mortgage lender can walk you through this decision and work with you to determine the best option.

TwinCity Lending is Here to Help Veterans Buy A Home

If you’re a veteran looking to buy a home, the experts at TwinCity Lending are here to help. We understand the VA loan program and can walk you through your credits to determine how much home you can afford. Bring your COE, and we will get you pre-qualified for a loan so that you can go shopping for your dream home. We’re proud to serve our veterans and stand ready to make your journey to home-ownership easier than you would expect. Give us a call today and let us help you get started.

Ready To Fill Out Your Loan Application? What Information Do You Need?

Home Loan

Home Loan

Have you decided it’s time to take the plunge into home-ownership? Perhaps you’ve owned before, but it’s been a while since you went through the process, or maybe you are looking to refinance an existing mortgage. In all of these situations, you will start with a loan application. Although each lender may have slightly different requirements, most applications are somewhat similar.

When you are ready to fill out an application, you will need to gather some documents first. Federal regulations and banking requirements mean that lenders need to collect a lot of information from you before sending an application to the underwriters. So be ready to buckle down and start a file of paperwork.

If you already feel overwhelmed, that’s normal. The friendly experts at Twin City Lending are here to keep it simple for you. Give us a call today to get started with our concierge lending services.

Why So Many Questions?

When you sit down to begin your loan application, you may feel excited, motivated, and eager. As the questions continue on and on, however, you might start to feel a little bogged down or frustrated. You may begin to wonder why they need so much information from you.

Keep in mind that you are asking the bank or credit union for a substantial amount of money. They have to do their due diligence to make sure you will be able to keep up your end of the mortgage agreement. Also, many of the questions on a loan application reflect legal requirements from the government. The lender has no control over those parts of the process. They must be sure you metaphorically dot your I’s and cross your T’s.

Don’t feel like you have to complete the entire application in one sitting. Carve out 20 or 30 minutes to work on it. Then, if needed, find another chunk of time later on to continue. You will find the process a bit easier if you take some time to gather all of the necessary documents before you begin.

What Information Do I Need To Fill Out the Loan Application?

Paper

In general, a mortgage loan application will ask about three broad categories: employment, the property you wish to purchase, and money. Within each of these topics, there will be subtopics, and your answers will need documentation to support them. Here’s a look at the typical information you will need to supply.

Employment Questions

  • Where do you work?
  • What is your position?
  • How long have you worked there?

In general, a work history of at least two years with one company works in your favor during the loan process. Contract work and self-employment will make the process a little more lengthy. These situations certainly are not deal-breakers, but they do add more work for you in filling out the application.

Property Questions

  • What is the address?
  • Do you plan to live in the home as your primary residence?
  • Will it be a rental property?
  • Is it a multi-unit property?
  • What is the purpose of the loan you are seeking for the property? Is it a new purchase or a refinance?

Single-family dwellings that you intend to live in make for the smoothest application processes. Financial institutions assume you will be highly motivated to make your mortgage payments for a home you live in, and therefore you are less likely to default.

If the property is a rental, you may need to provide a market analysis showing how much you can expect to charge for the lease. If you already have tenants lined up, the lender will love to see documentation of that arrangement.

Money Questions

Home Loan

This section is the biggie, and this is where the lender will dive into your viability as the recipient of their loan. The money questions on a loan application generally fall into three categories:

1. Income

  • How much do you earn at your job? Be prepared to provide W-2s,1099s, and recent pay stubs. You also need to supply the previous two years’ tax returns. In some situations, lenders will require additional returns.
  • Do you have other sources of income? If you have dividends or rental income, include it here and provide documentation to support it. Include any alimony or child support you receive as well.
  • Is your income steady or variable? Variable income can make the loan application process a bit more complicated, but your lender will walk you through any additional requirements.

2. Debts and liabilities

  • How much consumer debt do you have? Be prepared to provide documentation of your credit card and other revolving credit debt.
  • Do you have student loans or car loans?
  • Are there any outstanding financial judgments against you, such as through a court? If so, you probably will need to show documentation of the judgment and payment schedule.

The lender will run a credit report and obtain a credit score for you very early in the loan application process. If you know that you have errors on your credit report, work to get those fixed before you apply for a mortgage.

3. Assets

  • How much money is sitting in your bank account right now? Be sure to have at least two months of bank statements ready to go.
  • Do you have any retirement savings, such as a pension, 401K, or IRA? Again, have your most recent statements available to go into your file.
  • Do you have other investment accounts such as stocks, bonds, CDs, or mutual funds? Be ready with, you guessed it, recent statements.
  • Do you own other property? If you have an investment property or paid-for cars, you may be able to list those as additional assets.

TwinCity Lending Can Help

Buying or refinancing a home is a significant process. But it shouldn’t have to be complicated and confusing for the buyer. The friendly team at TwinCity Lending is here to make your experience perfect. Let our experience and expertise work for you.

With our attention to detail and our ability to simplify the process for you, we will have you on the road to home-ownership in no time. If you’re ready to get started on a loan application, give us a call today. We can’t wait to serve you.

Understanding the Return on Investment (ROI) on Rental Properties

House

House

After buying their first home, many people turn to real estate as an investment. Buying a vacation home can be a good prospect for many people, as you get to rent it out all year long and have the bonus of enjoying the house for your vacations. Others purchase townhomes or condos that they rent out for market rates to cover the cost of mortgage payments and expenses. Later, they can sell the property at a profit or use the equity to finance further investments.

Whether you are buying a rental property in a faraway exotic location or right around the corner in your hometown, real estate can bring a healthy return on your investment (ROI). If you’re interested in joining the ranks of investors who see substantial returns on their rental properties year after year, then it’s time to get started.

The friendly and knowledgeable pros at TwinCity Lending can help you finance your rental property. We also have some tips to help you understand the positives and negatives of rental property game and how to be sure your investment is paying off.

What to Know Before You Buy a Rental Property

If you want to know how to buy a rental property, work with a real estate agent and lender who specialize in the business.

Establish an LLC

In most cases, you’ll want to form a limited liability company for your real estate investment properties to keep them separate from your personal assets, such as your own home. Setting up an LLC will cost between a few hundred to a few thousand dollars, depending on where you live and whether you use an attorney to handle your affairs.

Qualifying for the Mortgage

Just like when you purchased the home you live in, you will need to qualify for the mortgage for the rental property. Your lender will evaluate your credit score, debt-to-income ratio, overall debts, salary, and payment history to offer you a loan and interest rate.

To be approved for the new mortgage, you prove you can afford to pay it every month whether or not you have any rental income. You cannot rely on having a tenant at all times. Even when the rental property is vacant, you are still responsible for the mortgage, property taxes, insurance, and maintenance.

Your lender can help you find a mortgage that will work with your specific financial situation. You may be able to borrow against the equity in your primary residence to obtain your down-payment for your rental property purchase.

Consider Rental Property Expenses

Of course, it’s more than just paying the mortgage on your rental property every month. Just as with your primary residence, you will be responsible for the taxes, insurance, maintenance, and repairs on your investment property.

If the HVAC unit dies or the roof leaks, you’ll have to pay to have them repaired or replaced. You’ll also have to budget for replacement of items in the home that depreciate over time, such as carpet, plumbing, and appliances. You’ll need to keep the house in good shape, with painting, gutter cleaning, pest control, and lawn maintenance.

Unlike your primary home, however, a rental property can incur additional expenses. You may have to pay legal fees if you need to evict a tenant or go to court. A bad tenant can cause damage to the property that you must pay to repair. And of course, the most substantial risk to your ROI is if the property sits without a tenant, meaning no income is coming in for you.

Managing the Property

Pool

If you buy a rental property, you’ll have to determine who will handle it. If the tenant has a problem, such as maintenance or pest-control issue, who will they contact? Will they call you directly, or will you hire a property manager? Will that person be an individual, a maintenance company, or a firm that specializes in managing rental properties for their owners? You’ll typically pay property management firms 10% of the rent you receive from your tenants, so you’ll want to factor that expense into your investment calculations.

Tenants want their landlords to be accessible and responsive. They leave reviews for your property and your management online that affect other people’s desire to rent from you. Think carefully on how you will manage your rental property so that you aren’t woken up in the middle of the night about a water leak, or unavailable to your tenant while you travel for work or are on vacation.

You’ll also want to think about Homeowner’s Association fees and how those costs will be recuperated. In many cases, the owners must pay HOA fees — that’s you — and not the tenant. However, you may wish to incorporate those costs into your monthly rental charge, if the rental market in your area will support the increased price.

Utilities and sanitation services are another concern to consider. Will you include those costs in the rent? Will they remain in your name or will the tenant be responsible for setting up their accounts? A combination of both? There are many details to consider when buying and managing a rental property.

A property management firm can also help you market the home as available for rent as tenants come and go, and manage communications with your renters.

What is a Good ROI on Real Estate Investment?

If all goes well and you have responsible, long-term tenants and expenses that meet your budgeted expectations, you’ll enjoy the increased monthly income from your rental properties and the growth in equity from your investment.

Experts cite 10% per year as a good ROI for real estate investments. That’s about 7% rate of return plus 3% inflation. You might not make that return in your first year, but once things settle down and you get better at pricing and managing your property, it’s a good bet that you can make that ROI with your rental.

If you’re ready to join the ranks of rental property investors, give us a call at TwinCity Lending. We’ll be happy to be your partner and adviser in this process. We’ve helped many area real estate investors, and we look forward to putting our expertise to work for you.

What is Mortgage Insurance and How does it Work?

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Buy Home

If you’re a homeowner, you’ve probably been on a crash course to learn all the various terms and conditions of getting a mortgage and closing on a house. From escrow to deed-in-trust to points to PITI, you likely haven’t had to memorize so much jargon since high school geometry. We haven’t even talked about insurance.

There are several new types of insurance you’ll need to know about and consider as a homeowner. These include homeowners’ insurance, which protects your home and its contents against loss in case of a fire, theft, or another event, such as a storm. Other coverage you may not have heard of before is mortgage insurance, of which there are two kinds. At TwinCity Lending we will help you understand these various insurances, and walk you through how mortgage insurance works.

What is Primary Mortgage Insurance (PMI)?

Primary mortgage insurance, or PMI, is a policy you are required to have by most lenders if you owe more than 80% of the balance of the mortgage. This mortgage insurance protects the lender should you default on the loan. PMI allows lenders to make riskier loans, which means that more people can get approved for mortgages and become homeowners.

Loan applicants who have a down payment of at least 20 percent of the home’s selling price have a statistically lower risk of having trouble making mortgage payments or defaulting on their loan. But it can be difficult for many home buyers to save up tens of thousands of dollars for a 20-percent down payment. PMI makes it possible for people to buy homes with as little as three percent down, or in some cases, no down payment at all.

PMI is paid directly to your lender every month as part of your mortgage payment. You pay a PMI insurance premium each month until the amount you owe on your loan drops below 80 percent of your home’s current value. As you pay your mortgage principal down — and your home’s value goes up — you will reach this threshold and can petition to have PMI removed from your loan. After years of on-time mortgage payments and getting your loan-to-value percentage to 80 percent, you will have joined the group of lower-risk homeowners and no longer need to carry PMI.

If you want to buy a home but don’t have a sizeable down payment, talk to us at TwinCity Lending about private mortgage insurance. PMI is an additional monthly cost, but it can make homeownership possible. We will work with you to calculate how much your monthly payments will be and help you determine how much home you can afford.

The other type of mortgage insurance protects you, the homeowner, should you lose your job, become disabled, or die. This mortgage insurance is called mortgage protection insurance, or MPI, and it can be a good investment for some homeowners to ensure they can make their mortgage payments or do not lose their homes if an unplanned event or accident occurs.

What is Mortgage Protection Insurance (MPI)?

Insurance

After you signed all the mortgage paperwork and moved in, do you ever wonder what would happen to your home and your family if you became injured, disabled, or died? How would your family pay the mortgage if you lost your job, could not work, or were not around? If you’re worried about this situation, Mortgage Protection Insurance (MPI) may be right for you.

Mortgage Protection Insurance is an insurance contract, similar to life insurance or disability insurance, that will pay a percentage of your mortgage payment for a certain period if you lose your job or become disabled. Most MPI also pays the balance of your mortgage directly to the lender — paying off your loan — if you die. That means your family will then own the house free and clear, and not have to worry about a mortgage refinancing or home sale after your death.

MPI can be useful for people who have risky jobs or health issues that make it more difficult or more expensive to qualify for life insurance — which many people also use to pay off their mortgages in case of their death. Unlike life insurance, however, mortgage protection insurance is easy to obtain. Many people with chronic health conditions or a previous catastrophic illness such as cancer are not approved for life insurance, or the premiums are too high to be cost-effective.

Other times, life insurers won’t issue a policy to someone whose job puts them in higher-than-average danger. Without the ability to get life insurance, your options for a payout that would ensure your family can stay in their home after you die can be slim. Mortgage Protection Insurance provides a solution.

If you’re wondering how much mortgage protection insurance is, the answer is that it varies. The cost of mortgage insurance varies from person to person, just as life and disability insurance do. The benefits of your policy also differ — MPI is not a one-size-fits-all product. You can opt for benefits that pay a smaller amount per month to assist with mortgage payments for a longer period, or a larger monthly payment for a shorter period, for example. Everyone’s financial and family situation is different, so MPI policies are flexible to help protect your unique needs.

At TwinCity Lending, we offer mortgage protection insurance to our clients as part of our portfolio of services. Mortgage protection insurance helps give you the peace of mind that you or your loved ones will have the stability of your home even if tragedy strikes.

Contact us at TwinCity Lending to discuss these two types of mortgage insurance and how they will impact your ability to buy a home. If you’re already a homeowner and you’re interested in adding MPI to protect your home and your family, we can help you with that too. Give us a call and let our experienced and friendly staff help you make sense of the mortgage jargon and protect your most significant investment.

Why You Can Afford a Home in the Twin Cities Area of Minnesota

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Lake View

Since the 2009 recession, Minneapolis has recovered strongly and experienced excellent job growth and stability. The city’s unemployment rate is the lowest in the entire nation, at 2.3% in October 2018. That is better than the unemployment rate for the state of Minnesota and for the US as a whole, which was 3.9% for the same period.

People who are looking for good jobs in the Twin Cities will find them here, at one of the many Fortune 500 companies who make their home in the area or one of the diverse economic sectors such as manufacturing, education, government, health care, and finance.

With all these good jobs and low unemployment, the real estate economy is doing quite well. More people than ever can afford to buy a home in the Minneapolis and St. Paul area. At TwinCity Lending, our job is to get you into the home of your dreams by finding favorable mortgage financing you can afford and sustain. While the economy is strong, it’s a good time to put down your roots in the Twin Cities. Contact us to learn how to afford a home in the area.

It’s all well and good to say that you can afford a home in the Twin Cities, but let’s take a look at the numbers. When you examine the cost of living in Minneapolis, the average home prices, and jobs available in the area, you’ll soon learn why homeownership is not just a pipe dream for Twin Cities residents.

Affording a Minneapolis Home

The median home price in Minneapolis was $257,100 in 2018. To qualify to purchase a home at this price, you typically need a combined household income of around $75,000 annually, and twenty percent down. According to the Census ACS 1-year survey, “the median household income for the Minneapolis, St. Paul, and Bloomington Minnesota metro area was $76,856 in 2017, the latest figures available”.

The figures quoted above put the Twin Cities’ median household income at around “$16,520 greater than the US median household income” and $8,468 higher than the median household income for the state of Minnesota. These numbers mean that the average Minneapolis household can afford to purchase a home which is great news for those who want to achieve the dream of homeownership.

And while $257,100 is the median home price point, there are properties below and above that midpoint. There is are homes in the Twin Cities for high wage earners who want luxurious and high-end properties and for lower-income families who wish to realize the dream of homeownership.

If we eliminate St. Paul and Bloomington from the calculations, the median family income for Minneapolitans was $96,807 in 2017, according to the same survey. With that income, it is easier than ever to buy a home in the city. You will qualify for mortgage loans for homes over $350,000 and be able to put less money down. There are hundreds of home options for you to choose from in Minneapolis at that price point, from trendy lofts to townhomes to single-family suburban homes.

Good Jobs in Minneapolis

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How do you determine what makes a “good job?” It depends somewhat on the person, but in general, a good job means a living wage, competitive benefits, good working conditions, and opportunities to advance. That’s according to Bruce Corrie, a Concordia University economist who studies employment and cost of living.

There are many types of these jobs available in Minneapolis, across many different economic sectors. One of the most in-demand industries in the area is health care. Companies are hiring registered nurses, nursing assistants, licensed practical nurses, and personal care aides. Radiologists, sonographers, and other medical technical positions are in high demand also.

The median wage for an RN in Minnesota is $72,000, and higher in Minneapolis proper. Registered nurses can afford an average Minneapolis-area home as a single homebuyer. Medical secretaries and assistants earn a livable wage at around $35,000 to $40,000 annually — a tidy sum to contribute to a household income and qualify for a home.

In addition to health care, other in-demand occupations in the Minneapolis area are in information technology (IT), finance, manufacturing, and construction. The city is experiencing a real estate boom, with lots of new construction and renovation work to convert former industrial structures into beautiful urban living spaces.

If you’re looking for jobs in Minneapolis, MN, many Fortune 500 companies are hiring. US Bancorp has its headquarters in the city and employs about 13,000 people in Minnesota. Target Corporation also has its main corporate offices in downtown Minneapolis, and 17 other of the largest US companies also call the city home.

From 3M to Best Buy to United Health Care, General Mills, and Hormel, there are plenty of well-paying jobs for college graduates. The city also has a strong manufacturing base as well as retail, leisure, construction, and truck driving careers available for residents who do not have a bachelor’s degree. In all, the job market is plentiful for living wage jobs that allow people to afford a home.

Cost of Living in Minneapolis

It costs a bit more to live in Minneapolis than the United States on average. The cost of living index measures 100 as the average cost of living in the nation; Minneapolis sits at 116 overall, and the state of Minnesota is slightly more expensive than the national average at 106 on the index.

Some things are cheaper in Minneapolis, such as groceries (93 vs. 100) and healthcare is markedly less expensive in the area at 87 on the index. Housing is the most significant expense for Minneapolis residents, and the cost of living index rating of 138 reflects that. However, you’ll recall that the average household income in the area is also much higher than the state and national averages, helping offset the higher cost of living with higher wages.

Contact TwinCity Lending and Become a Homeowner

As you can see, if you have a job in the Twin Cities area, you’re living and working in a place where the dream of homeownership is possible. There are many affordable housing options for Twin Cities residents and homes available in a variety of price ranges and budgets. Get in touch with us today and let us help you find your way to homeownership in Minneapolis or St. Paul.

The Housing Market in Minneapolis vs. the Nation

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Buying a house is a big decision, and the process can be quite scary. Investing so much of your hard-earned money in one place can feel overwhelming. Beyond just price, you will spend a significant amount of time in your home, so you want it to be a good one.

You will often hear the terms “buyer’s market” or “seller’s market” in the real estate industry. What are these terms and what do they mean to you? The US housing market can be a fickle monster, and the trends are ever changing. Plus, the housing market differs regionally, so it can be hard to know what you are going to get.

TwinCity Lending is a Minnesota-based lending company that specializes in low-interest home purchases and refinance loans. We like to keep things simple. The goal is to keep overhead costs low, so our clients have to spend less. We know the local and national housing markets, and can help you navigate the sometimes murky waters of buying a home.

What is the Housing Market?

The Housing Market, in general, is the availability of houses compared to the demand for those houses. Often, it is broken down by country or region. The US housing market is entirely different from the Chinese housing market, just as the Minnesota housing market differs greatly from the San Francisco housing market.

A housing market is based mostly on the average price of homes in that area as well as where the prices are trending. In a “buyer’s market,” there is a greater supply of homes than demand for them. This imbalance gives buyers an advantage over sellers because sellers have to compete for buyers. A buyer’s market can result in lower prices for homes as sellers accept a below-list price offer in order to get the sale.

On the contrary, a “seller’s market” is when there is a higher demand for homes than supply. In this market, house prices typically increase as there are more buyers than sellers. Houses will often sell incredibly quickly in a seller’s market.

How is the US Housing Market?

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Most of us have heard the term “housing bubble,” and the subsequent pop of that bubble in 2006. This event was particularly devastating because it led to a nationwide recession. Between 2006 and 2012 home prices fluctuated but many had significant drops. A slump in the housing market affects just about every area of our economy.

Since then, policies regarding lending and home buying have changed. The market is not back to where it was, but the national economy, in general, is in a better place. According to US News, the housing market is seeing the highest interest rates since 2011, evidence of this stronger economy. Interest rates rose three separate times in 2018 and are expected to rise at least once in 2019.

Though these rising interest rates are a good sign for the overall economy, they can make many buyers hesitant to dive into the housing market. The good news is that these rising rates should not add much to your monthly mortgage payment. However, even an extra $100 a month could cause some people to hold off buying.

Due to the decline in buyers because of rising interest rates, home prices are growing slowly, if at all. Homeowners who are interested in selling might reconsider putting their home up for sale.

The potentially lower selling price of their current home, plus the necessity to buy in this higher-interest market might make sellers hold off if they can. Many current homeowners will keep their home and build equity by paying down their mortgage.

Data put out by Realtor.com corroborates this trend. The US housing market is experiencing a slower start in 2019 than in previous years. About 15 percent of home listings in the United States received a price cut this month to try to stimulate sales.

In the US overall, residential construction still hasn’t rebounded to where it was before the bubble burst. Builders are more cautious because if there were to be another recession, housing prices would dip, and they might not be able to recover their investment.

Due to this caution, there are not enough housing starts to meet the current demand for homes nationally. Most new construction has focused on high-end, luxury homes, rather than affordable housing.

How is the Housing Market in Minneapolis?

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Real estate agents and economists in the Twin Cities have seen some of the effects of these national trends. However, many experts have pointed out that the housing slowdown isn’t as noticeable in Minneapolis and Minnesota as other parts of the country.

David Arbit, the director of research and economics at Minneapolis Area Association of Realtors, believes that while the local housing market is not gearing up, it isn’t necessarily declining, either.

To make things more interesting, home prices in Minneapolis are not falling. Homes across the area are continuing to sell for close to their asking price. Strong sales are an indicator that the market is still beneficial for sellers.

Even in Minnesota, mortgage rates have risen to an average of more than 5% for a 30-year fixed loan. While this is the highest rate in years, it is still low in the historical view. Minneapolis is an incredible place to call home. Even though nationally the housing market is slowing, there are still plenty of homes on the market in the Twin Cities.

The average house in Minneapolis sells for about $245,000. The average local buyer puts down 13.6% of the selling price. All of these aspects show how affordable Minneapolis is, and why everyone should consider buying a house here. In particular, young professionals and first-time buyers can benefit from buying now.

Call TwinCity Lending Today

At TwinCity Lending, we want to help people get into their dream home. We spend a significant amount of time analyzing the housing market. We work hard to ensure that you are buying your home at the best rate possible.

Furthermore, we make sure you don’t end up paying a hefty amount in fees. We know you don’t have time for that.

Check us out online and browse our tools to help you understand what you can afford, and what your mortgage payment might be. We will even help you decide if you should buy or rent! We will help see if you qualify for a mortgage, and calculate your tax savings. Call us today and see how soon you could be moving into your dream house.

Minneapolis Economy and What it Means for Home Buyers

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If you’re looking to buy a home in Minneapolis, 2019 may be a good year. The Twin Cities’ economy is thriving, and analysts predict continued prosperity and positive trends. There is a boom of new construction in both urban and suburban areas. And massive renovation projects are reclaiming former industrial structures and turning them into the hottest new lofts, condos, and neighborhoods downtown.

TwinCity Lending knows the local economy and will help you get favorable financing for your dream home. We can help you figure out timing, payment terms, closing costs, and interest rates so you can close the transaction on that contemporary chic condo overlooking the Mississippi or the home with the fenced backyard for your kids and pets.

Several demographic and economic factors affect the housing market and help determine whether it’s a good time to buy a home. Unemployment, demand for homes, population changes, construction, taxes, and interest rates all affect your ability to purchase a home and what price you will have to pay.

Twin Cities Unemployment is Lower than the National Average

In early 2019, the national unemployment rate is 5.2 percent. Minneapolis and St. Paul are doing even better, with the local unemployment rates at 3.7 percent and about 4.1 percent respectively. Large employers in the area include corporations headquartered in Minnesota, such as 3M, Target, Best Buy, US Bancorp, General Mills, and United Health Care.

The low unemployment rate means jobs are plentiful and businesses typically are hiring. That is good news for potential home buyers because they have a lower risk of being laid off from a job. Workers also have greater mobility in a healthy economy with low unemployment. You can search for a different position — perhaps one with better salary and benefits — while continuing to work at your current one.

<h2″>Mixed Economy

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Minneapolis and St. Paul’s economies are strong because of public and private investment. Minneapolis has a robust manufacturing base that includes electronics, medical products, milling, food processing, and machinery manufacturing. The city’s economy also benefits from the presence of high-tech companies, several universities and technical schools, and 30 Fortune 100 companies. In addition to the private sector, the Twin Cities has many government institutions, from the ninth Federal Reserve to state-level government offices.

Furthermore, Minneapolis’ local government and Chamber of Commerce have invested heavily in the city’s infrastructure. Their economic development grants transformed vacant mills and constructed the Skywalk that makes it easier to navigate the downtown business area. A mixed economy such as the Twin Cities boasts, bodes well for tax revenues and further investment. With both private and public support, Minneapolis’ economy can better weather any downward dips that come its way.

Positive Trends

Analysts forecast that job growth in the Twin Cities area will continue to outpace that of the nation. The Minneapolis job market grew 1.2 percent over the last year, and economists forecast 38.8 percent growth over the next ten years. These trends correlate with a stable housing market in which homes hold or increase their value.

At $32,232, Minneapolis residents have a higher average annual income per person than the US national average of $28,555. While the cost of living in Minneapolis is slightly higher than the national average (116 vs. 100), the higher wage gap more than offsets the difference.

Diverse Community

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The Twin Cities consistently ranks as one of the top places to live in the United States, especially for young professionals. Minneapolis ranks alongside Chicago, San Francisco, and Brooklyn, as a mecca for hipsters who value local economies, walkability, environmental sustainability, the arts, entertainment, a thriving food scene, and natural spaces.

As the area’s reputation increases, more people want to move here. This desirability drives the price of homes up, so buying now means that you will earn equity quickly as the value of your home rises. In 2018, homes in St. Paul increased in value an average of 9.3 percent, again besting the national average.

Favorable Interest Rates for Mortgages

Interest rates for 30-year and 15-year fixed rate mortgages remain low and affordable. Lower interest rates mean that you pay less for the home in the long run so that you can afford more house or a higher sale price and stay within your budget.

Mortgage rates have again fallen below the 5% mark in 2019. The average 30-year-fixed loan interest rate is around 4.5%, and a 15-year fixed rate mortgage average interest rate is approximately 4% as of February 2019. Analysts predict the housing market will remain robust, so there will be stable buyers and sellers. Lenders such as TwinCity Lending are here to secure home loans for those ready to buy.

Economy Predicted to Continue to Do Well in 2019

According to analysts, the national economy will remain strong in 2019. Most predict that unemployment will continue to drop, and positive economic indicators will cause inflation. When this happens, the Federal Reserve increases the federal funds rate between banks, which helps slow or stem the higher prices that come with inflation.

When the Fed raises rates, banks increase interest rates for borrowers and investors. For homebuyers, higher rates increase the cost of your purchase and your monthly mortgage payment. To stay within your budget or to qualify for your loan, you will need to borrow less by purchasing a lower-priced home or having more cash at closing.

Start Home Shopping Now

Buy Property

Many people move in the summer months, which is easier for families with children who need to switch schools. To move in the summer, sellers start listing their homes in February and March, expecting about 90 days minimum from listing to closing. Additionally, builders and contractors finish many projects as the weather warms.

That trend means now is a great time to start buying a home before rates rise. There will be more homes on the market in the next few weeks, and the Minneapolis and St. Paul economies are thriving and trending upward. As more people become interested in this area, your home’s value will increase. Buy now so you can build equity right away.

Contact us at TwinCity Lending, and one of our expert loan counselors will assist you every step of the way in the home buying process.

Home Equity Loans: What They Are and What They Can Do for You

Home Equity Loans

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If you’re a homeowner, you know that with every mortgage payment you make, you’re building equity in your home. Equity is the amount of your home you own at a given point in time. Every time you pay toward your mortgage loan’s principal, you are building that amount of equity. The longer you’ve been paying on your mortgage, or the more your home has gone up in value (or both), the more equity you will have.

One of the benefits of building equity is that it is an asset. You can borrow against your equity with a home equity loan or line of credit.

What is a Home Equity Loan?

home equity loan is a loan from a lender, such as a bank, credit union, or mortgage broker, for an amount less than or equal to the available equity in your home. Sometimes called a home equity installment loan, these loans typically have fixed rates, predictable and stable monthly payments, and a fixed term, usually between five and 30 years of repayment.

Home equity loans are disbursed in a lump sum, and people tend to use them for large expenses such as home repair or remodeling, college tuition, medical expenses, a wedding, a large purchase, or even to buy a second home or vacation home.

Another term for a home equity loan you may have heard is a second mortgage. You already have your first (primary) mortgage on your home that you got at the time of purchase. A home equity loan is secured by the equity in your home. That lender now owns part of your home until you pay off the loan.

When you take out a home equity loan, you now have two mortgages: the first one from the time of purchase, and the second one for the equity you borrowed. Just like with your primary mortgage, if you default on a home equity loan, the lender can foreclose and take possession of your house.

How Does a Home Equity Loan Work?

Home Loan

The terminology for a mortgage or home equity loan can be confusing, leading many people to ask “How does a home equity loan work?” and “What can a home equity loan do for me?” At TwinCity Lending, we specialize in first and second mortgages, and we can guide you through the process of choosing, qualifying for, and closing on a fixed-rate home equity loan.

Home equity loans work much like your primary mortgage. Your lender must determine your ability to borrow or your creditworthiness. To do so, they will evaluate your income, expenses, debts, and payment history. They will also consider your FICO, otherwise known as your credit score.

Determining your home’s current value is an integral part of the home equity loan process. Your lender will require a new property appraisal to obtain the amount your home is worth. The appraiser will look at the condition of your home, any upgrades you have made, and the sales price of comparable properties in the area that have recently sold.

With the appraisal in hand, your lender will then determine how much equity you have available in your home. Subtracting the balance on your mortgage (how much you still owe on your home) from the appraised value provides the calculation for the amount of equity you have. Depending on your creditworthiness and your lender’s standards, you may not be able to borrow the entire amount of equity you have.

Your lender will then ask how much of this equity you would like to borrow. This amount adds to the balance of your current mortgage and then gets divided by the home’s appraised value to obtain the combined loan-to-value (CLTV) ratio. How high or how low this percentage is will determine whether you are eligible for the loan or what your interest rate will be. A lower CLTV will qualify for a lower interest rate, and vice versa.

Since a home equity loan is a mortgage, you will have to go through closing a second time. That means a new title search to ensure there are no other liens or encumbrances on your property. There also may be origination fees or other closing costs. Often, these get rolled into your new loan, so you typically do not have to bring any cash to closing.

Fixed-rate home equity loans have a specific rate that is fixed (stays the same) over the entire term of the loan. That means that the interest rate will not increase (or decrease) according to the market. A fixed-rate home equity loan is predictable, as you have the same payment amount due every month for the entire loan, which assists with your budgeting. It is also stable since it does not swing with the market. The rate that you qualify for will be based on your credit-worthiness, the length or term of the loan, and the combined loan-to-value of your mortgages and your home.

What Can Home Equity Loans Do For You?

Home equity loans often have lower interest rates than other types of debt, especially credit cards. A fixed-rate home equity loan can be an excellent choice for debt consolidation and paying off higher-interest loans. They are also commonly used to pay for college tuition or a wedding for your children, or another large expense. Some people borrow against their home’s equity to get the down-payment to purchase a vacation home, retirement home, or even a rental property.

Unlike other types of debt, mortgage interest is generally deductible on your federal income taxes, so there may be some tax advantages for you to use a fixed-rate home equity loan for your borrowing needs.

Let TwinCity Lending Help

We have helped hundreds of Minneapolis and St. Paul area homeowners navigate the home equity loan process. We are standing by to help you, too. Our friendly and knowledgeable staff will help you determine how much equity you have to borrow, and what type of loan will be right for you. Contact us today to see if a fixed-rate home equity loan will help you with your financial plans and life goals.