Saying “I Do” to Homeownership: How to Prepare for This Big Commitment

Buying a home is a major commitment. It’s a bit like, well, getting married. You’ve got to be ready and you have to find the right “one.” And, like a marriage, homeownership is a dynamic experience that requires a tremendous amount of care and attention. If you are ready to shift from renter to buyer, you’ve got some legwork to do.

Here’s how to prepare:

Credit matters
Quite simply, the past can either haunt or help you. If your debt-to-income ratio is too high, financial institutions will likely be wary of extending you another loan. If you have had problems repaying past obligations, a lender will have trouble trusting that you will pay your mortgage on time.

You can increase your FICO score (a credit scoring model that helps lenders assess risk) by reducing debt, making timely payments, not shopping aggressively for credit, having a variety of credit instruments, and keeping at least one credit card for a long period of time. Make significant improvements in as few as six months.

Understand what you can afford
Most lenders require that total housing costs not exceed 28% of gross monthly income, and total debt payments per month (including the mortgage) not surpass 36%. In real terms, this means that if you owe no consumer debt and have a household income of $75,000, then $1,750 in housing costs is within your range.

Accumulate cash
If you don’t have at least some cash in your coffer, start a savings plan now. How much you will need depends on many factors, including the home price and how much you will put as a down payment. Closing costs, points, moving expenses, and a post-purchase reserve fund of two to three months worth of housing payments can add up to many thousands of dollars.

Once you own your home, you may eventually want a bigger or better living space. Rather than purchase a new residence, first consider remodeling. You can add rooms and customize your home to meet your needs and desires without having to move. Yet while remodeling can be wise, it can also be stressful and expensive. Be careful when hiring someone to do the work for you. A contractor you hire should:

  • Have a licence
  • Carry general liability insurance
  • Carry workers’ compensation insurance
  • Provide you with a written waiver at the end of the job
  • Guarantee work for at least one year from date of completion
  • Provide you with references
  • Be financially sound, so won’t declare bankruptcy in the middle of your project
  • Can provide proof that he or she has completed similar projects
  • Ensure that the price includes removal of all job debris and full clean up

So how are you going to pay for those fabulous improvements? There are three basic options: cash, refinancing, and using home equity.

  • Cash: If the job is small or short term, paying with cash is often the best method. A nice advantage of using savings is that you won’t have to repay a loan for the work that is done. When using cash, be sure to pay in agreed-upon increments.
  • Refinancing: Swapping a higher interest mortgage for a lower interest one can free up money for the project. You can refinance your existing mortgage and take all or part of your current equity in cash. Keep in mind though, that it will only be cost effective if you plan on remaining in the home long enough to recoup the closing costs and other fees associated with refinancing.
  • Home equity: Using home equity can be a great way to make major improvements – and get a tax benefit of interest deduction at the same time. To tap into your home’s equity, you can get a conventional second mortgage, a home equity loan, or a home equity line of credit. Second mortgages and home equity loans are best for large, long-term projects that require lump sum payments. Home equity lines are good for short-term projects or those requiring incremental payments.

Finally, remember that at home is not only where the heart is—it is also where the money is. You can get the most from your relationship with real estate by giving it the time and attention it requires, just like a marriage.

Visit our Real Estate Loans and Mortgage page to learn more about how you can get started today.

Provided by Balance.

How do the new tax laws affect mortgages?

You may have heard about the Tax Cuts and Jobs Act that was signed into law at the end of December. This major legislation affects many things. If you want to learn more about how it affects you, please reach out to a certified tax professional.

Wauna Credit Union CXO John Moore
John knows that changes in the tax law can change how people deal with their finances.

The Wonderful World of Wauna decided to dig a little deeper. So, we sat down with our CXO John Moore, who has 23-years of experience in finance, which includes overseeing Wauna Credit Union’s mortgage and lending teams, to talk about how the new laws impact mortgages.

Please note, this blog should not replace advice from a certified tax advisor.

Thanks for taking the time to speak with us.
My pleasure. It’s great to talk to somebody who’s beard is almost as magnificent as mine.

Can you give an overview of how the new laws change things?
In general the law lowers the limits related to mortgage deductions. In short if you own expensive real estate you may not get the deductions you used to. The main changes:

  • The maximum mortgage debt homeowners can deduct was decreased from $1 million to $750,000. Although those with existing loans are grandfathered in
  • The law eliminates tax deductibility for interest paid on home equity loans and home equity lines of credit (HELOCs)
  • The deduction for property taxes is now limited to $10,000

How does this change things for mortgages?
The thing it really does is make first mortgages much more appealing. Since the interest in first mortgages is still deductible, and because the rates on first mortgages are almost always lower than equity loans and lines, we expect to see more of our members looking at refinancing.

What about members who want to do home improvement, or previously used home equity loans and HELOCs to finance other things, like education and paying down high-interest debt?
First mortgages can be great for that as well. Since Oregon and SW Washington have seen a dramatic rise in home values, most of our members have a lot of equity in their homes. Those who have a big expense can take care of it with a cash out first mortgage for any home improvement or debt consolidation.

Does this make second mortgages less appealing?
Not necessarily, even though non-housing interest is no longer deductible on equity loans, they still are very useful. First of all, the rates on equity loans tend to be lower than non-secured loans, which means you are still stretching your money further. In addition, just having an equity line handy in case of emergencies can provide tremendous peace of mind.

Any final things you’d like us to know?
Han shot first.

Thanks John for taking the time to speak with us. If you have any questions about mortgages WCU has experts in every branch who are happy to help you with your existing mortgage, or get you on the road to home ownership, and phone consultants available 24/7 at 800-773-3236. 

Statement Insert – JUNE 2017 – HELOC, VISA, Financial Education

Wauna Credit Union June Statement Insert

Home Equity Line of Credit
It’s the DO Days of Summer!
What’s on your list?
Open up the possibilities with a Home Equity Line of Credit!
Learn more about our special summer HELOC offer on our website or at any Wauna CU branch, and apply today!

Credit Cards
Planning a vacation?
Take a Wauna CU VISA credit card along!
Platinum VISA Credit Cards
Reward VISA Credit Card
Apply on our website or at any Wauna CU branch!
Lower Interest Rates & Fees, Secure EMV Chip Cards, Great Rewards, Balance Transfer Bonus, Introductory Rate Offer

Financial Education
When it comes to money management, we could all do better. Wauna CU now offers Financial Education programs for everyone!
BALANCE for adults
Elements of money for teens
M3 for younger kids

waunafcu.org
800-773-3236

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HELOCS Are Cool, Just Ask Barbara Norman!

Barbara Norman-webWauna Credit Union is offering special terms for HELOCs (Home Equity Line Of Credit) until July 31st! Now is the time to put your home’s equity to work for those fun home improvement projects, or nearly any need one might have. One reason so many people prefer HELOCs to Home Equity Loans is that you use the money you need when you need it. It is rotating and versatile!

Our current promotion offers a 1.99% interest rate for the first 6 months! Plus, since we are a Credit Union, there are NO Loan Origination Fees like many other financial institutions have. And, as an added bonus, we will give the holder of every approved HELOC a DIY project starter kit including a tape measure, torpedo level, & a carpenter’s pencil!

To learn more, we cornered Barbara Norman, an expert from our Wauna CU Mortgage Department, here’s what she had to say about HELOCs.

First, we asked Barbara to name THREE great things about a HELOCs, and she was quick to respond!

  1. Access to emergency funds instantly!
  2. Pay interest only on funds used!
  3. No costs (except appraisal if needed)!

Next, we asked her what a homeowner would need to qualify for a HELOC?

  • Income, equity in the home, & pretty good credit.
  • A month of Paystubs.
  • 2 years W-2s and Federal Tax Returns.
  • Home Owner’s insurance.
  • Current Mortgage Statement on 1st Mortgage, if any, and possible other docs depending on circumstances.

What can homeowners spend the money on? Are there rules or limitations?

Barbara: They can spend it on buying a car, pay off debts, home improvements, cash for vacation, buying additional property, and much more!

What is the benefit of getting a HELOC via Wauna CU?

Barbara: We pay for the title policy, flood certification, recording fees, and tax service, if any.  The member would pay only for appraisal, if it is required.

We thought we’d stump Barbara when we asked this question: What is the ‘Coolest” thing about HELOCs? Because of course, how could a HELOC be cool? But, Barbara didn’t even blink when she responded, why you ask? Because as Barbara has proven HELOCs ARE COOL!

Barbara: I think the coolest thing about a HELOC is having the funds for emergencies; whether your water main breaks, roof leaks, or you have a medical emergency, it takes the worry out of the equation.

Thanks Barbara!

Now, we all know a little more about Home Equity Lines of Credit, and if you would like one, please apply online or stop in any branch to talk to your local Member Service Officer.

Learn More about our HELOC Promotion: https://waunafcu.org/loans/current-loan-promotion.shtml