Taras&Co (2025)

06/04/2024

30-year mortgages have almost always been what you imagine when getting a mortgage as it offered a sweet spot for borrowers seeking an optimal balance between affordable monthly payments and overall cost-effectiveness. Now, the lesser-known 40-year mortgage offers an intriguing alternative for those looking to stretch their payments even further. Though not as widespread as their 30-year counterparts, 40-year mortgages present a unique solution, especially for borrowers facing financial challenges.
What Sets the 40-Year Mortgage Apart?
The crux of a 40-year mortgage is in its extended repayment period – a full decade longer than the standard 30-year term. This longer timeframe translates into lower monthly payments, providing immediate financial relief. However, it's important to weigh this short-term gain against the long-term implications: a higher interest rate and more total interest paid over the life of the loan. Moreover, 40-year mortgages often fall under the category of non-qualified mortgages (non-QM loans), meaning they're not as readily available through conventional lenders and are usually employed in scenarios of loan modification for payment relief.
Navigating the Availability of 40-Year Mortgages
So, where does one find these elusive 40-year mortgages? Typically, they emerge as a lifeline for borrowers struggling to keep up with current loan payments. Mortgage servicers may extend the loan term to 40 years as part of a modification program, potentially also reducing interest rates and loan balances. Programs like the Flex Modification offer such options for conventional loans, and similar paths exist for FHA loans. A handful of lenders might offer 40-year mortgages outside of modification scenarios, often structured as adjustable-rate mortgages (ARMs) with initial interest-only payments, targeting borrowers expecting future income growth but currently constrained by debt or other financial limits.
Weighing the Pros and Cons
Before diving into a 40-year mortgage, it's crucial to consider both sides of the coin. On the upside, these mortgages can significantly reduce monthly payments, offering a more permanent solution than temporary measures like forbearance. Yet, their limited availability, potentially higher interest rates, and the increased total interest cost over time are significant drawbacks. Furthermore, the Consumer Financial Protection Bureau (CFPB) categorizes these as "unqualified" mortgages, so you'll find that many established banks and lenders steer clear of offering them.
While a 40-year mortgage can be a useful tool for specific financial situations, particularly for those needing a long-term solution to make home payments more manageable, it's vital to thoroughly understand the long-term financial implications, so fill out our loan analyzer on our website or schedule a meeting and we can find the program that best fits your needs!

30/03/2024

The Fed's pattern of rate hikes through early 2022 to mid-2023 culminated in a pause, announced at their latest meeting on March 20, 2024. Despite this pause, we've seen mortgage rates fluctuate. A notable instance was the decrease in rates in late December, despite the Fed's decision to maintain its key rate during its December 13 meeting.
Lawrence Yun, the chief economist at the National Association of Realtors, explains that the bond market, including mortgage-backed securities, often adjusts longer-term interest rates in anticipation of future Fed policies. While the Fed plans to cut rates later this year, the exact timing remains uncertain. While the rates have remained unchanged, there's an expectation of three rate cuts in 2024.
How the Federal Reserve Influences Borrowing Costs
The Fed sets borrowing costs for short-term loans via the federal funds rate, which affects how much banks charge each other for overnight loans. This rate, increased in 2022 and 2023 to control inflation, impacts borrowing costs across the economy, including credit card rates and home equity loans. However, fixed-rate mortgages, the most popular home loan type, are more closely aligned with the 10-year Treasury yield rather than the federal funds rate.
The Fed's role in buying and selling debt securities also indirectly affects mortgage rates by influencing the credit flow.
What Affects Mortgage Rates?
The primary influencer of fixed-rate mortgages is the 10-year Treasury yield. A notable gap typically exists between this yield and the fixed mortgage rate. In 2023, the gap widened, leading to more expensive mortgages.
Mortgage rates are also subject to:
• Inflation: Higher inflation often leads to increased fixed mortgage rates.
• Supply and Demand: Lenders adjust rates based on their current business volume.
• The secondary mortgage market: The demand from investors for mortgage-backed securities can lower mortgage rates. Conversely, lack of investor interest might cause rates to rise.
The Fed's Impact on Adjustable Rate Mortgages (ARMs)
While less common than fixed-rate mortgages, ARMs are significantly influenced by the Fed's decisions. ARMs often tie to the Secured Overnight Financing Rate (SOFR), which the Fed’s actions can affect. Changes in the fed funds rate lead to adjustments in SOFR, consequently impacting ARM rates.
If you are looking to make a move this spring make sure to schedule a consultation with us on our website and we can review your needs and what best fits your needs.

17/03/2024

In the realm of home financing, interest-only mortgages present a unique blend of short-term affordability and long-term considerations. If you're contemplating this type of mortgage, understanding its mechanics, benefits, and potential pitfalls is crucial.
What is an Interest-Only Mortgage?
Interest-only mortgages allow borrowers to pay only the interest component of their loan for a predetermined period, usually 7 to 10 years. During this time, you won't pay down the principal balance. After this phase, the loan reverts to a standard amortizing mortgage, where both principal and interest are paid, typically at a variable rate.
A Brief Historical Context
These mortgage types gained traction in the early 2000s, offering immediate low payment relief. However, they played a significant role in the 2007 housing crisis and subsequent recession, leading to stricter regulations and a reevaluation of their role in the mortgage industry.
The Mechanics of Interest-Only Mortgages
During the interest-only phase, your payments may be considerably lower than traditional loans. However, this doesn't include the principal, meaning no equity build-up during this period. After the initial phase, you must repay the principal, resulting in significantly higher payments, especially as these are now amortized over a shorter period.
Case Study: Interest-Only vs. Traditional Mortgage
Consider a $330,000 loan. With an interest-only mortgage at 5.1%, your initial monthly payment would be around $1,403. Post the interest-only phase, assuming a stable rate, this jumps to $2,033. In contrast, a 30-year traditional mortgage at 5.54% would cost $1,882 monthly, a more consistent figure over time.
Qualifying for an Interest-Only Mortgage
Post-housing crisis, these loans are less accessible and come with stringent qualifying criteria, such as high credit scores, low debt-to-income ratios, substantial down payments, proof of future earnings, and ample assets.
Is an Interest-Only Mortgage Right for You?
These mortgages suit certain financial strategies and situations, like expecting a future income increase, needing lower initial payments, or planning a property sale before the interest-only period ends. However, they come with risks, such as payment shock post the initial period, market rate vulnerabilities, and the potential for negative equity.
Pros and Cons at a Glance
Pros:
• Lower initial payments.
• Potential for larger or better-located homes initially.
• Delaying larger payments or avoiding them if relocating.
Cons:
• No equity build-up initially.
• Risk of unaffordable future payments or large balloon payments.
• Dependence on market rates.
Alternatives and the Refinancing Option
Consider alternatives like adjustable-rate mortgages with introductory low rates or government-backed loans offering affordable payments without the interest-only risk. Refinancing into an interest-only mortgage is possible but comes with similar qualification hurdles and additional costs like appraisals and closing fees.
Conclusion: Think Long-Term
Interest-only mortgages offer flexibility but demand a strategic long-term view and a thorough understanding of their implications. Remember, the right mortgage choice is one that aligns with your overall financial goals and lifestyle needs. Your mortgage journey is unique, and we're here to guide you through every step. Schedule a consultation on our website and we can help find the best mortgage options for your situation.

10/03/2024

When you're in the market to buy or sell a home, understanding all the costs involved is crucial. One of these costs, often overlooked, is the real estate transfer tax. This blog post aims to shed light on what real estate transfer taxes are, how they differ from other taxes, their costs, who typically pays for them, and where the funds go.

A real estate transfer tax, sometimes referred to as a deed transfer tax or documentary stamp tax, is a one-time fee imposed during the transfer of property ownership. This tax is usually based on the property’s sale price and can vary significantly depending on the location.

How Does It Differ From Other Taxes?
It’s important to distinguish real estate transfer taxes from other types of taxes like property taxes, estate taxes, and gift taxes. Property taxes are an ongoing expense paid annually, mainly used for public services like schools and roads. Estate taxes apply when transferring assets (which might include real estate) of a deceased person to their heirs. Gift taxes are due when property is gifted and its value exceeds a certain threshold. Unlike these, real estate transfer taxes are a one-time cost incurred during the property sale process.

Cost of Transfer Taxes
The rate of real estate transfer tax varies by state. For instance, a $500,000 property sale might attract just $50 in transfer taxes in Colorado but can be as high as $3,500 in Florida. This cost is part of the closing costs and is not deductible against income tax. However, it can increase the tax basis of the property for the buyer, which might be beneficial in reducing future capital gains taxes.

Who Pays the Transfer Taxes?
The responsibility for paying transfer taxes can differ based on the state and even the specific terms of the real estate contract. While in many places the seller pays these taxes, in others, it’s the buyer's responsibility, or the cost is split between both parties. This can often be a point of negotiation during the sale process.

Where Do Transfer Tax Funds Go?
The funds collected from real estate transfer taxes are used by local governments for various purposes, such as infrastructure maintenance or paying public employee salaries. In some states, these taxes contribute to the state budget.

States Without Real Estate Transfer Tax
Interestingly, several states do not impose any real estate transfer tax. These include Alaska, Idaho, Indiana, Kansas, Louisiana, Mississippi, Missouri, Montana, New Mexico, North Dakota, Oregon (in most counties), Texas, Utah, and Wyoming.

01/03/2024

Securing a mortgage in the current housing market can be challenging. With rising mortgage rates, soaring home values, and a pace of home price appreciation that far exceeds wage growth, getting a mortgage approval is far from guaranteed. This blog post aims to clarify the mortgage approval process, highlight typical obstacles, and provide advice for prospective homeowners.
The Mortgage Underwriting Process
Mortgage underwriting is where lenders assess your financial situation. This process involves a detailed examination of your financial documents - bank statements, tax documents, W-2s, pay stubs, and any additional information requested by the lender. The objective is to determine whether you qualify for a loan.
The traditional, more subjective methods of assessing creditworthiness have been replaced by automated underwriting software systems like Desktop Underwriter for Fannie Mae loans or Loan Product Advisor for Freddie Mac loans. These systems use algorithms to approve, reject, or request more information from applicants.
Top Reasons for Mortgage Application Denial
1. Credit Issues
Your credit score is a crucial factor in the mortgage process. While higher scores (above 740) often get the best rates, you can still qualify for certain mortgages with lower scores. It’s essential to check your credit score, correct any errors, and maintain your score during the mortgage application process.
2. Income Shortfalls
Lenders look at your debt-to-income (DTI) ratio to determine if you can handle an additional loan. A DTI ratio above 43% is typically undesirable, with 36% being more favorable. If you have substantial debts, such as student or car loans, it’s advisable to reduce these before applying for a mortgage. Self-employed individuals might face extra challenges due to irregular income or the way tax write-offs impact reported income.
3. High Loan-to-Value (LTV) Ratio
A high LTV ratio, which compares the loan amount to the property’s value, can be a red flag for lenders. A larger down payment, resulting in a lower LTV ratio, can improve your loan approval chances.
4. Financing Challenges for Certain Properties
Some properties, like condos or manufactured homes, can be more difficult to finance. Structural issues or other property-related concerns can also hinder loan approval.
5. Recent Financial Instability
Financial stability is important to lenders. Recent changes in your job, a history of sporadic employment, or unusual banking activity can impact your loan approval.
What to Do If Your Application is Denied
If your mortgage application is denied, use our qualifier wizard on our website and schedule a consultation. Whether it’s addressing credit issues, lowering your DTI or LTV ratios, choosing the right type of property, or ensuring financial stability we can do a deep dive and see what best fits your needs!

23/02/2024

For this month’s market watch we are seeing home prices continue to climb as well as sales of existing homes according to a recent report by the National Association of Realtors (NAR), even in the traditionally quieter month of January.
A Glimpse of Hope in Existing Home Sales
Interestingly, the market is witnessing a slight resurgence in the sales of existing homes. These are properties that have been previously occupied, as opposed to brand-new constructions. This increase is attributed to more listings becoming available. According to the NAR’s chief economist, Lawrence Yun, while sales figures are still lower compared to a few years back, the rise in January indicates a balance beginning to form between supply and demand, thanks to modest increases in listings and homebuyers capitalizing on currently lower mortgage rates. The trajectory of the housing market in the coming months is expected to be significantly influenced by the direction of these mortgage rates.
Trends in Existing-Home Sales
The statistics for existing-home sales, encompassing all completed transactions of non-new-construction homes, showed a national increase of 3.1% month-over-month in January 2024, reaching an annual pace of 4.0 million homes. Despite this uptick, the figure represents a 1.7% decrease year-over-year.Regionally, the West saw a 4.3% monthly increase, while the South experienced a 4.0% rise. The Northeast remained unchanged monthly but saw a 5.9% annual decrease, and the Midwest increased by 2.2% monthly, with a 3.1% annual decline.
Home Prices: Continuing to Climb
The median sale price for existing homes nationally was $379,100 in January, marking a 5.1% increase from last year and the highest price for January on record. This trend reflects a persistent rise in home prices, with the median reaching its peak at $413,800 in June 2022. This increase has been a part of a remarkable run in the U.S. housing market, with a record streak of year-over-year median sale price increases.
All four major U.S. regions experienced annual price increases in January, with the West leading at $572,100, up 6.3% from a year ago.
The Challenge of Low Housing Inventory
The total housing inventory at the end of January was 1.01 million units, slightly up from December but still indicative of a market short of the five to six months' supply needed for a balanced market. This limited inventory is partly due to the reluctance of homeowners to sell, especially those who secured mortgages at lower rates in the past.
Key Takeaways for Homebuyers and Sellers
For prospective homebuyers and sellers, these trends offer both challenges and opportunities. Buyers face high prices and mortgage rates, yet there's a growing inventory of existing homes. Sellers, on the other hand, are in a strong position due to high demand and limited supply, but must navigate the implications of current mortgage rates. Of course if you want to review options schedule a free consultation on our website.

01/09/2023

As we've seen large storms hit both coasts recently, it's a good idea to use the old Boy Scout motto and "be prepared." We are going to review general steps to take to prepare for something we of course never happens. Natural disasters, from hurricanes to earthquakes, wield a devastating power that leaves homeowners and entire communities grappling with significant property damage and high repair costs.

The Financial Impact of Natural Disasters on Homes
In 2022, the Insurance Information Institute documented nearly $100 billion in insured losses stemming from natural disasters. Here's a breakdown of the data:

Severe storms: These accounted for over $29 billion.
Earthquakes: About $14.7 billion per year, as per a joint study between the USGS and FEMA.
Floods: 15 instances in 2022 led to $3.3 billion in losses.
Wildfires: Resulting in a staggering $8.9 billion from 26 separate events.
Hurricanes: Three events led to a total loss of $53.2 billion.
Winter storms: Produced $4.1 billion in damages from 13 occurrences.
How Can Homeowners Prepare?
1. Reinforce Vulnerable Areas
Install wind-resistant doors and storm-proof shutters.
Use plywood to board up windows and doors when a storm approaches.
2. Know Your Utilities
Identify where water, gas, and electrical lines are and know how to shut them off.
3. Water Diversion
Use sandbags around entryways and flood-prone zones.
4. Secure Loose Items
Ensure outdoor furniture is tied down.
Move grills, tools, toys, and other items inside.
5. Tree Maintenance
Trim trees regularly to prevent overhanging branches from causing damage.
6. Furniture Safety
In earthquake-prone areas, attach heavy furniture to walls.
7. Landscaping Smartly
Choose fire-retardant plants like Rockrose and aloe, and avoid flammable trees like pines.
8. Guard Against Pipe Bursts
Wrap vulnerable pipes to protect them during extreme cold.
9. Have an Emergency Plan
Assemble an emergency kit with food, water, medications, chargers, and other necessities.
Keep both digital and physical copies of important documents, including evacuation routes and insurance policies.
What Does Home Insurance Typically Cover?
A standard homeowner's insurance policy covers damage due to:

Thunderstorms
Hurricanes
Tornados
Wildfires
Blizzards
However, it's essential to note that standard policies usually exclude flood or earthquake damage. Those living in vulnerable zones should consider supplemental policies to stay covered.

In conclusion, while the unpredictable force of nature cannot be avoided, homeowners can adopt a proactive stance. By understanding your insurance policy and taking preventive measures, you can shield yourself from the worst financial aftershocks of natural disasters.

25/08/2023

A balloon mortgage might sound like a fun name, but it's a serious financial commitment. Simply put, it’s a home loan wherein you make low or no monthly payments for a short period, typically five to seven years. Then, you’re expected to make a significant lump sum payment, often called the 'balloon payment', to settle the remaining balance. Due to its unique structure, this mortgage can be both tempting and treacherous. Let's dive into its intricacies.

The Mechanics of a Balloon Mortgage
So, how does this peculiar mortgage work? For a set duration, you'll make minimal payments that could go solely towards interest or might include a portion of the principal, depending on your loan’s terms. At the end of this period, be ready for the balloon payment – a hefty sum that can exceed double your monthly installments. This structure can manifest in a few ways:

Balloon Payment Structure: Your initial monthly payments might mimic those of a 15 or 30-year mortgage, but the full balance becomes due much sooner, say in 5 or 7 years.
Interest-Only Payments: For a while, you only tackle the interest. When this phase concludes, you owe the remaining loan balance.
No Payments: This high-risk version involves no monthly payments for a brief term, but interest keeps accumulating. Once the term concludes, you owe both the interest and the principal.
The Allure and Concerns of Balloon Mortgages
On the surface, balloon mortgages seem attractive. They promise low initial outlays, the opportunity to buy a home sooner, and the flexibility to focus on other financial objectives. Moreover, they typically lack a prepayment penalty, allowing borrowers to settle their debt earlier without extra fees. However, they come with significant caveats. The looming balloon payment can jeopardize your home ownership if you can’t meet the commitment, leading to foreclosure. Plus, these mortgages are elusive, often bearing higher interest rates than conventional loans, and refinancing can be challenging.

Making Informed Decisions on Balloon Mortgages
So, when does a balloon mortgage make sense? It’s a viable choice for property flippers, intending to sell before the balloon payment is due. If you're eyeing it for your primary residence, ensure you have a well-planned exit strategy, whether that means selling, refinancing, or paying it off with savings or an anticipated windfall.

Remember, while the prospect of low initial payments might be enticing, balloon mortgages come with undeniable risks. If you're seeking affordability, consider alternatives like adjustable-rate mortgages (ARMs), FHA graduated payment loans, or VA loans. These might offer the financial relief you need without the looming threat of a massive balloon payment.

18/08/2023

Today we are going to cover two terms we often hear used in the home buying process that are sometimes used interchangeably but there are some differences. So we will review "closing costs" and "predpaids" and what makes them different.

The Basics of Prepaids in Home Buying

Prepaids are the advance payments a homebuyer makes to cover specific future expenses before they come due. Typical examples include homeowners insurance premiums and property taxes.

While they are paid at closing, they don't go directly to the vendor or provider. Instead, your lender will keep these funds in an escrow account. Over time, the lender will distribute payments from this account as required.

Here's a closer look at standard prepaids:

Mortgage Interest: This is applicable when you close on any day other than the first of the month. The prepaid interest covers the days from closing to the end of that month and is held in escrow for your first mortgage payment. A savvy tip? Closing near the end of the month might save you some money.
Homeowners Insurance: Lenders usually require six to 12 months of homeowners insurance premiums at closing. The lender will then disburse this to your insurance provider monthly.
Property Taxes: Lenders estimate the property taxes you'll owe and generally request two months of these taxes upfront. From your escrow, they will then forward these payments to your local government.
Initial Escrow Deposit: This deposit often includes two months each of homeowners insurance and property taxes. It ensures your escrow account has a healthy buffer for future bills.
For clarity, these prepaids are detailed in the closing disclosure document provided by your lender, typically three days before closing. You'll find them on Page 2, Section F.

Deciphering Closing Costs

Closing costs, on the other hand, are the one-time fees paid directly to various parties involved in processing your mortgage. These can be to your lender (like application fees) or third parties (like home inspection fees).

Often, sellers might cover some of these costs as a gesture or part of the sale agreement. These are called seller concessions. However, it's essential to remember that the buyer always foots the bill for prepaids.

Here's a snapshot of frequent closing costs:

Loan-related fees: For processing and originating the mortgage.
Appraisal and Inspection fees: To assess the value and condition of the property.
Title-related fees: To ensure the property title is clean and transferable.
Attorney fees: For legal oversight and ensuring all documentation is in order.
Prepaids vs. Closing Costs: The Breakdown

In conclusion, while both prepaids and closing costs are payable at the purchase's closure, they serve different purposes. Closing costs are direct payments for services rendered, whereas prepaids are essentially a buffer for future homeownership expenses, managed by your lender. Of course, we will guide you through all this when you are getting ready for closing. If you are looking to purchase now and want to review your options go to our website and complete our 60 second purchase analysis.

05/08/2023

A lot of people don't realize that it's a good idea to watch your financial P's and Q's before closing your mortgage. Here are five common mistakes to watch out for to avoid any closing crises.

1. Making a big purchase, including furniture
If you’re about to close on a house, it’s not the best time to get a new car, boat or other expensive item. Even furniture or appliances — basically anything you might pay for in installments — is best to delay until after your mortgage is finalized.
Depending on your credit score and history, these transactions can lower your score, which can impact the interest rate and loan amount you receive. This could result in a higher interest rate for the next 15 or 30 years, or even having to come up with a larger down payment.
Bottom line: Wait to purchase a big-ticket item, because “this can ruin their chances of staying qualified for a loan,” says Patricia Martinez-Alvidrez, business development officer for Stewart Title in El Paso, Texas.
2. Opening a new line of credit
It’s not just big purchases that can alter your credit score. Opening a new credit card or closing an existing one can affect your standing, too. In the runup to your mortgage closing, lenders make an assessment of the credit risk they are taking on and go through several steps to assess that risk for each loan applicant.It’s especially important to protect your credit score if it’s low enough that you’re on the margins of qualifying for a mortgage at the start of the process. Any changes in that case can work against you and might make it impossible to finalize the loan.
3. Switching or quitting your job
Another major mistake to make when you’re about to close on a home purchase is changing jobs. This is because mortgage lenders examine your employment history for consistency, and providing additional documentation on employment to a lender can delay the closing.
If you have any control over your job situation, it’s best to stay put until after you close. A borrower who quits their current job might have to wait a couple of weeks before they can attempt to close again.
4. Disrupting the timeline
Closing on a mortgage is time-sensitive. Even if you’ve locked in your rate, that only guarantees things for so long. It’s important to keep on top of the schedule and make sure all of your paperwork is submitted on time. Otherwise, you risk losing the terms you agreed to and could have to start the process over again.
5. Taking out a personal loan
If you get a personal loan or co-sign a loan for someone else, you could also face hiccups before getting to the closing table. In some instances, the lender might turn you down for a loan altogether even if you were previously preapproved.
It depends on how your credit score and debt-to-income (DTI) ratio is impacted. A good DTI, in particular, is a critical factor in mortgage approvals. Lenders consider two types of DTIs:
Front-end DTI: Your monthly mortgage payment, including principal, interest, taxes, insurance and association fees divided by your monthly income
Back-end DTI: The sum of all your monthly debt payments divided by your monthly income
Depending on the amount of the loan payment, your back-end DTI could increase to a percentage that the lender is unwilling to accept. If your credit score is right above the minimum to qualify for a mortgage, a hard inquiry that results from applying for a personal loan could drop it to a point that makes you ineligible. Either way, there’s a chance you’ll be forced to walk away from the deal.

It’s not always smooth sailing when going from the mortgage application process to the closing table. However, there are actions you can steer clear of to minimize roadblocks and ensure your loan closes on time. You also should review your credit report, scores and identify ways to optimize your financial health to give yourself the best chance at securing a mortgage with competitive terms. And definitely give us a call if you're in your closing and not sure :)

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