Q&A WITH MARK SPRAGUE
Mark Sprague is a noted and respected expert on the real estate industry and the Austin market, in particular. He is also the Director of Business Development for Mission Mortgage and we are fortunate to have access to his expertise and opinions. Mark receives numerous questions each week and today he is going to address a number of mortgage-related questions he has received recently. Today, Mark addresses questions about credit, equity, and foreclosure.
QUESTION: I am currently in the process of looking to buy a second home and in the process of leasing another car for our child. When the dealers check your credit; does it affect your credit score? Would getting another car now bring down our credit score? Right now we both have very good credit around 740.
ANSWER: Adding debt will impact your credit score, but if it is not significant it will only be a small change and will move back up after a few payments. Whenever your credit is checked it does create what is called an inquiry on your credit report and too many can have a real impact on your credit score. It is best to know your credit score and only allow someone to run your credit if you are serious about moving forward with the purchase. When you apply for a mortgage, the lender will ask that you explain why you have the credit inquires and confirm to them that no new debt was incurred as result of it.
QUESTION: I am trying to decide if I should buy or rent in today’s market. I am in my late 60’s and I am retired and live solely on my assets which consist of social security, a small pension along with the money from the sale of my home which was sold 4 years ago which was about $600,000. I am currently renting an apartment and my rent is $2,250 a month. Should I buy a condo, and if I do, should I pay for it outright or put 20% or more down and get a mortgage? Would I even qualify? I am just very unsure as to what I should do.
ANSWER: There are many aspects to this answer that require some financial analysis and decision on your part. What can you own for the similar cost of renting? Your $600,000 of savings also generates income which would be decreased if you use it to buy a home so you need to consider that impact. Having cash available for other needs or emergencies is important. If you can find a home that you like and the cost is comparable to renting after using a mortgage for some of the purchase, you will be in a good place as values should increase gradually over the coming years. We recommend that you speak to one of our mortgage professionals to go over your options and help you with these important decisions.
QUESTION: I have lived in my house for about 10 years and I am ready to make some home improvements. Can I take cash out of my home and use that money for the improvements? Or can I just tack that onto my mortgage?
ANSWER: In most cases mortgages do not allow you to add onto the loan amount once you have signed the loan papers. If your current mortgage has an interest rate that is higher than the current market you can consider refinancing the mortgage to a lower rate and increase the mortgage amount to include the cash your require for the home improvements. The other alternative is to access the equity in your home with a home equity loan in addition to your current mortgage. Our experts here at Mission Mortgage can help you to sort out your options and make the right financial decision for your circumstances.
QUESTION: I want to re-finance my home as my current rate is 6.25%- do I need to re-qualify for a new loan?
ANSWER: When you refinance your mortgage you are required to submit a new application and provide all of your current financial information to the lender for a new approval. There are some programs that may be available only through your current Mortgage lender that does not require full processing of this information. These are often referred to as “Streamline” refinances. When you are ready to move forward, contact on of our mortgage experts to determine which of these programs are available to you. You can email us at email@example.com for more information.
QUESTION: How would I go about taking equity in my home? There are some improvements I want to make but I have only lived in the house for a few months? Do I have to live here for a certain amount of time and pay a certain amount toward my mortgage?
ANSWER: You first have to determine the value of your home minus how much you owe on your mortgage. You can then take an equity loan in the amount between your first mortgage and your proposed equity loan as long as it does not exceed 80% of the value. However, to take out an equity loan you must have owned the property for a minimum of 6 months and you can only get one equity loan per year so make sure you get what you need the first time. Check with a Mission Mortgage representative for specifics for your situation by emailing us at firstname.lastname@example.org.
QUESTION: If my house is foreclosed upon, how will that affect my future credit? Will I ever be able to get a loan again or buy another home when I get back on my feet?
ANSWER: A foreclosure will adversely affect your ability to purchase a home for 7 years for a conventional loan and 3 years for an FHA or VA loan. If this is a road that is inevitable, speak to a Real Estate Attorney to see if a Short Sale may be an option. This will have less impact on your credit.