Retiring and Mortgaging -- Possible? Yes! If you take these steps.

So, you’re about to retire and thinking about “right sizing” for the next phase of your life or refinancing to a shorter or longer term for your current home.  What things should you consider?  According to Diane Pyshos, Sr. Mortgage Consultant, it is important to take into consideration the following information before taking any actions: 

1.         What is the Projected Cost of a New Home?  On-line research and open houses can be reliable sources for projected purchase prices on single family homes, townhomes and condominiums. 

2.         Are you purchasing an existing or newly constructed home?  If you are purchasing an existing home, this means the home is already built.  However, you should also factor in any additional improvement costs such as landscaping, decorating and furnishing.  If you are purchasing a new construction home, it is important to include the “extras” (costs over and above the base home price).   It is also important to know if you are purchasing a new construction home from a developer/builder or if you are building a custom home which requires a construction loan (which is a completely different loan type not contemplated in this article). 

3.         What is the market value of your current home?  Although there are plenty of real estate search sites available, they may not always contain exact “comparable” sales and their estimated market value could be high or low, depending on how your home compares to the other recently sold properties.  The most accurate source for current market value is an appraisal or a CMA (Comparative Market Analysis).  A comparative market analysis is an examination of the prices at which similar properties in the same area recently sold. Since you are thinking about selling anyway, this is a good time to contact a highly respected real estate agent to ask them for a CMA to help determine your home’s market listing and sale price. 

4.         What is the estimated net sales proceeds from the sale of your current home?  The net sales proceeds differ from one geographic area to another.  In the Chicago, IL area, the estimated net sales proceeds calculation is:

Estimated sales price

-  8% (closing costs)

-  Mortgage balance(s)

= Net Sales Proceeds

5.         What is your projected down payment for your new home?   This is a customized amount depending on the amount of mortgage (if any) you intend to obtain.  The mortgage amount will take into account some of the following factors:

►        The monthly housing expense that is most comfortable for you:  Your mortgage professional will be able to calculate the maximum mortgage amount that will result in your desired monthly housing expense.

►        Loan to Value and Current Rates:   Different down payment percentages can result in higher or lower rates.  It is important to work with your mortgage professional to determine the down payment percentage that will result in the lowest possible rate. 

►        How much of your assets can be invested toward your home while still leaving sufficient retirement funds:  Your financial advisor will be able to assist you in determining how much of your liquid assets can be applied to your down payment. 

6.         If still employed, how long will you continue your employment?  The number of years you plan to be employed might be under your control or possibly not.  If you are in a down sizing industry, your employment future may be uncertain, in which case it is important to consider projected retirement income.  If you plan to sell your current home and purchase another home, it is best to do so while you are still employed full time.  There are so many variables and logistics with selling and buying, it’s best to eliminate the largest variable which is income. 

7.            When do you plan to retire, and will it be before or after your purchase?  If you plan to retire before purchasing a new home, it is extremely important to evaluate your retirement income with a seasoned mortgage professional such as myself to verify if you have “qualified” retirement income to support your new mortgage loan.  Acceptable retirement income sources include:  Social Security, pension, annuity, 401k and IRA distributions, real estate income, and other similar benefits.  I can let you know what documentation is required to support various retirement income sources. 

8.            How to structure your distributions from non-retirement vs. retirement accounts?  To qualify as income, all distributions from investment accounts must be from IRA, Roth IRA, or 401(k) accounts.  If the distributions are from non-retirement accounts, they may not be counted as income (for mortgage underwriting purposes).  Other valuable information about distributions: 

                ►Minimum distribution history:  Sometimes mortgage underwriters require a minimum number of years for receiving retirement distributions.  This is up to the underwriter’s discretion.  Most underwriters allow the distributions to be recent; in which case, the first distribution needs to be made before the mortgage loan closes and the amount and frequency needs to be verified in writing by the financial advisor.

                ►Frequency of IRA distributions:  Monthly, quarterly or yearly – most underwriters prefer monthly.

                ►Minimum age to receive IRA distributions:  59-1/2 (minimum age for penalty-free retirement account distributions).

                ►Minimum # of years distributions will continue:  Divide total asset amount by yearly distribution amount.  Net result must be at least three years.  For stocks/equities, use 70% of total asset value divided by monthly distribution amount.  Underwriting requires a minimum of 3 years continuance for distributions to be counted as income. 

9.            After you retire from full-time employment, do you plan to work part-time, consult or freelance?  It is very common for salaried professionals to provide free-lance consulting services after retiring from full-time salaried jobs.  If you plan to receive income from a source other than full-time salary, you will need two full, consecutive tax returns showing your freelance, consulting, part-time or commission income before being eligible for mortgage financing.  Your mortgage process will be more successful if you obtain your new mortgage before retiring from your full-time, salaried position. 

10.          How do you know the number of years to repay your new mortgage?   There are rate advantages for repaying mortgages in 15-20 years vs. 30 years.  However, the monthly payments will be higher with the shorter terms.  Also, if mortgage rates are low, financial advisors typically recommend a longer amortization to hedge against inflation.  Longer terms with lower monthly payments are often an advantage with financial planning and monthly expenses.  This is something to discuss with your financial advisor and mortgage professional. 

Please contact Diane Pyshos for more details and your free consultation! 

                                                                                  

Diane Pyshos, Senior Mortgage Consultant

NMLS #137800 - Company ID #19291

A&N Mortgage Services

1945 North Elston Avenue, Chicago, IL  60642

312-909-9718

dianep@anmtg.com

 

THIS IS AN ADVERTISMENT.  This is not a commitment to lend.  A and N Mortgage Services, Inc. is an Illinois Residential Mortgage Licensee and Equal Housing Lender.  1945 N. Elston Ave., Chicago, IL 60642 P: 773.305.LOAN (5626) www.anmtg.com NMLS #19291 IL MB.0006638. Serving IL, IA, IN, FL, MA, MI, MN, TX, WI

 

 

Cool Information About How Rates are Quoted in the News

A buyer who is in the midst of obtaining a mortgage receives a 30-year fixed rate quote from his loan officer of 4% and then reads in the paper that the “30-year fixed average rate was 3.875%” for that same day.  Why is the average rate in the news almost always lower than the market rate quoted by mortgage professionals?   

I asked myself this same question; especially since borrowers are closely scrutinizing financial information during their mortgage process.  What’s the deal with how rates are quoted in the news?  The difference between actual market rates and the “average mortgage rate” quoted in the news is primarily due to “points” (also known as discount points) which are included in the “average mortgage rate.”   In a recent Chicago Tribune article published on February 16, 2018, the Tribune stated, “According to the latest data released Thursday by Freddie Mac, the 30-year fixed-rate average shot up to 4.38 percent with an average of 0.6 point. (Points are fees paid to a lender equal to 1 percent of the loan amount.)”   
 
That same day (February 16, 2018), the 30-year fixed market rate was:
 

Rate	Points
4.5%*	0
4.375%*	0.6

 

* Annual Percentage Rates (APR). 

Note:  This information was for an owner-occupied, single family home with a purchase price of $350,000, loan amount of $280,000, top tier credit score, with escrows.

 

There are other factors which influence rates such as:  property type (single family, condominium, 2 to 4 unit), property use (owner occupied, second home, investor owned), credit score, escrows, and down payment.  Annual Percentage Rates can also be affected by private mortgage insurance (PMI) for down payments less than 20%.   Each of these factors can result in as little as a 1/8% higher rate or might result in considerably higher rates.  Since the news does not report the variables included with their rates, it is difficult to compare one situation with the other.

 

Since the news articles do not always report the “points” included in their “average fixed rate,” the reader might conclude that their lender’s rates are not competitive!  Reporting about discount points, Bankrate.com states, “These are actually prepaid interest on the mortgage loan.  The more points you pay, the lower the interest rate on the loan and vice versa.  Borrowers can typically pay anywhere from zero to three or four points, depending on how much they want to lower their rates.”

 

In 2015, according to Freddie Mac, “The typical fixed-rate mortgage loan carried an accompanying 0.6 discount points.”  In previous years, particularly before zero-point mortgage options were available, everyone was quoting rates with at least an average of 1 discount point.  In fact, zero-point options were not available before the early 1990’s.

 

What’s the “point” of this article?  Avoid relying on news articles for your mortgage rate and pricing information!  Contact your mortgage professional to obtain reliable mortgage rate information!

 

Please contact Diane Pyshos for more details and your free consultation!

 

                                                                                

  

Diane Pyshos, Senior Mortgage Consultant

NMLS #137800 - Company ID #19291

A&N Mortgage Services

1945 North Elston Avenue, Chicago, IL  60642

312-909-9718

dianep@anmtg.com

Credit Breach – To Freeze or Not to Freeze? That is the Question!

A record data breach has recently occurred at Equifax which is one of three credit monitoring companies. A data breach is an incident in which sensitive, protected or confidential data has potentially been viewed, stolen or used by an individual unauthorized to do so. Through identify theft, this could potentially result in unauthorized charges on the victim’s credit cards, money stolen from bank accounts, credit scores ruined, false tax returns filed, and the identity thief could even commit crimes in the victim’s name.

The massive data breach affecting 143 million Americans represents 58% of adults over the age of 18! To see if your personal data has been compromised with Equifax, go to the Equifax emergency website, EquifaxSecurity2017.com, to determine if your information has been compromised.

At this point, the question is not if your information will be compromised, but most likely when. What are victims of a credit breach to do to protect their identity, assets and credit standing?


"If there is a breach and you’re concerned about identify theft, credit monitoring is not the most effective measure," Chi Chi Wu, a lawyer with the National Consumer Law Center, told NBC News. "A credit freeze is."


Although there are several steps a consumer can take to monitor credit, they do not necessarily insure data protection. It’s sort of like closing the barn door after the horse has left the barn.

How to Freeze Your Credit Report

To freeze your credit at Equifax, go to www.freeze.equifax.com.

Enter your complete name, address, social security number, date of birth, and code verification. On the next screen, select that you want to place a security freeze. Then confirm by clicking on "submit." The next screen will notify you that your security freeze request has been processed and that you will need to view and print your one-time PDF letter containing your PIN#. Write down your PIN code in a secure place when you receive it. Equifax has waived any fees to freeze credit with their company.

If you prefer to submit your request in writing, send the same information as requested on the website to: Equifax Security, Freeze P.O. Box 105788, Atlanta, Georgia 30348

It is prudent to do the same thing at the other two credit bureaus. You will most likely have to pay to freeze your credit with the other two agencies, but experts say it's worth it.
Experian: https://www.experian.com/freeze/center.html

TransUnion: https://freeze.transunion.com/sf/securityFreeze/landingPage.jsp(Allows a credit lock or freeze with advantages and disadvantages listed for each.)
After you complete your credit freeze, the only other entities that are allowed to see your credit report are government agencies carrying out a search warrant or subpoena and yourself (if you're trying to access the free credit report that is entitled to you once per year per credit bureau at annualcreditreport.com).  Once you have placed a freeze on your credit, if you wish to apply for new credit, you will need to unfreeze your records which can take a few days and in some states, you will be charged a fee for placing or removing a freeze.

Top 10 Credit Smart Actions to Take With or Without a Credit Freeze:
1. Contact one of the three credit bureaus -- Equifax, Experian and TransUnion -- to put a free fraud alert on your credit report, which makes it harder for an identity thief to open more accounts in your name. (Under law, each is obligated to notify the other two.) It lasts 90 days, but you can renew it. Fraud alert phone numbers for all three bureaus are: Equifax (1-888-766-0008), Experian (1-888-397-3742) or to speak with a person (714-830-7000), or TransUnion (1-800-680-7289).
2. File a complaint with the Federal Trade Commission (www.identitytheft.gov) and print your Identity Theft Affidavit. Use that to file a police report and create your Identity Theft Report.

3. Guard your information. Refrain from providing businesses with your Social Security number (even if they request it). Medicare recipients should be especially careful, because SSNs are printed on Medicare cards.

4. Don't provide personal information over the phone, through snail mail or via the internet unless you have initiated the contact or you know who you are dealing with.

5. When sending personal financial information to approved recipients over the internet, use encrypted transmission.

6. Beware of over-sharing on social media. Parents should also speak with their children about the dangers of sharing too much information.

7. Protect your password. Change logins and passwords monthly, use password generators and sign up for two-factor authentication.

8. Shop carefully. Don't send financial information on unsecured wireless networks, and when making purchases use a credit card, which has more fraud protections under federal law than debit cards or online payment services.

9. Review credit card statements promptly. Before you pay, make sure that there are no fraudulent charges.

10. Review your credit report (and your children’s) every 12 months at annualcreditreport.com. If you find an error, report it immediately and stay on top of the process.

Consumer Protection Laws – Fair Credit Reporting Act
Even as millions of consumers contend with fallout from the Equifax data breach, Republican lawmakers are quietly backing legislation to deregulate credit agencies and make them even less accountable for wrongdoing. Bills are pending in Congress to limit class-action damages for violations of the Fair Credit Reporting Act and to give credit agencies more latitude in profiting from identity theft protection products.

It’s ironic that, on the same day that Equifax announced this data breach, Congress was considering a bill that would dramatically reduce the consequences of violating the Fair Credit Reporting Act (FCRA) for the credit bureaus and other industry players.

We need stronger, not weaker, consequences when companies violate long-standing privacy laws, such as the FCRA. Credit bureaus, such as Equifax, should not be rewarded with reductions in legal accountability given these recent events.

Consumer advocates say the Equifax breach should serve as a wake-up call for Americans that the three leading credit agencies — Equifax, Experian and TransUnion — are focused primarily on earning cash from people’s personal information, not keeping such information under lock and key. "Consumers are not customers of these companies — they’re commodities," said Chi Chi Wu, a staff attorney with the National Consumer Law Center. "We have no say over what they do with our data."

"We need to prevent the fraudsters who need the creditors’ approval to open fake accounts using your stolen identity. Freezing your credit is the best way to accomplish this." Diane Pyshos reports.
 
Submitted By:
Diane Pyshos Sr. Mortgage Consultant, A & N Mortgage Services, Inc.
dianep@anmtg.com 312-909-9718
NMLS #137800 Company ID #19291
Offices in Chicago, IL and Union Pier, MI