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A mortgage calculator is a handy tool, but it cannot replace a mortgage professional. A mortgage calculator can give you a ballpark figure for what you can afford, however, based on your income and, depending upon how sophisticated the calculator is, the local tax rates and the cost of homeowner’s insurance for the properties you’re considering.

Caveats

Homeowner’s insurance rates will vary considerably depending upon where the home you’re looking at is located – especially in southern Louisiana – where the ability to get private coverage or having to go with the state Fair Plan may make or break your mortgage application!

You have to take this into account and using national averages is really not that useful as a means of determining how much you’re going to end up paying for this necessary cost. An insurance company is really the only reliable source for this info, or a mortgage broker that can find out from an insurance company for you.

You’ll also want to make sure that you consider taxes into the equation. These will vary from place to place and not all online mortgage calculators even consider this. If your taxes are around $3,000 per year, you can count on that amount being added to the cost of owning your home. This may put the cost of the home over the edge for you where affordability is concerned.

Make sure you take into account the fact that a mortgage calculator just gives you a number based on a percentage. For instance, a mortgage broker works with you in a way that mirrors how a bank will determine your suitability for a loan. This will include taking into account the amount of expenses you have already. Your car loan, insurance payments, credit card debt and so forth will all factor into how much you can afford in the way of a mortgage.

A mortgage calculator will usually just give you a percentage, somewhere between 28 and 33 percent, of your total income and factor in a few other numbers to determine how much you could borrow.

Calculators Have No Lending Authority

A mortgage calculator is handy and can give you some rough ideas of your borrowing capacity. However, it’s important to remember that banks don’t make lending decisions based on what these calculators say you can afford.

So while a mortgage calculator can get you started, give you an idea of how much you should seek and so forth, it takes a home mortgage professional to really determine how much you can borrow.

As mortgage lenders, one question we are often asked is whether or not you can refinance a home mortgage into just one person’s name.  There are some cases where you may want to have your mortgage debt in one name only. This can be done, but it will depend upon a couple of things:

Credit Ratings

In most cases, it will require that the person who is taking the debt into their name be able to qualify for it on the basis of their credit score and income alone. The refinance, however, is secured by the property, so this isn’t quite as hard as you may think. In most cases, one member of a married couple will be able to do this without any difficulty.

What About the Title?

You should still be able to leave the title in both names, even if the refinancing is only done under one name. The refinancing is just a loan and it’s used to pay off the first mortgage. This should only affect the financing, not the actual ownership of the house from a legal standpoint.

How Do We Do It?

NOLA Lending will help you fill out all the paperwork for the refinance and get you started on the process. Changing from one name to two will usually just be a matter of letting your lender know that this is something you want to do. Beyond that, the process won’t be any different than applying for any other form of refinancing.

Before getting started though, we will check the new borrower’s credit, so that aspect of applying for the loan will not change. The only difference will be that the paperwork will contain one name rather than two and that the refinancing will be done completely against one person’s credit and income. If that person happens to have excellent credit, it may be worth it to remove someone else from the application and to have it written against the name of the person who has the better credit. The loan is secured, of course, but credit still does play a part.

Cash out refinancing is a way that you can borrow money against the investment you have in your home by refinancing more than the balance you owe on your home mortgage. It’s important to remember that this is, in fact, a loan. It’s not a profit that you’re making off of your home and is definitely not “free money”. That being said, there are some significant benefits that you may be able to take advantage of by using this form of refinancing.

Benefit #1: Money

The most significant benefit is the money you walk away with. The cash out is literally money in your pocket. The amount that you’re allowed to borrow will depend upon the company you’re working with and your credit worthiness. In some cases, you may be able to borrow a high portion of what the home is worth (as much as 85% LTV) and, in some cases, you may have to settle for 70 or 80 percent of the home’s value in the total amount of the refinance.

The actual sum of the money you walk away with depends on how much you refinance for and the difference between that amount and the value of your house. You pay off the balance on your mortgage with the money you refinance and walk away with the balance in your pocket.

Benefit #2: Interest Rate Savings

You may be able to get a lower interest rate by refinancing. This is a strategy that some people use to offset what they’d pay in interest if they kept their current loan. For instance, if you owed $100,000 on a home and had a bad interest rate, you may find that refinancing the home for $120,000, paying off the $100,000 and using the additional $20,000 to pay off other bad loans may get you out of some interest debt that’s coming down the road. This is a rather popular strategy and can save you thousands in interest payments.

Benefit #3:  Taxes

If you use the money you get out of your cash out refinance to pay off credit cards or other debt, you may be able to basically transfer that debt to a form—your mortgage debt—that can be written off of your taxes in part. This means that you get more out of the money you pay toward your debts and also means that you can get out of some very common credit traps.  You should consult your NOLA Loan Officer as well as your tax advisor to find out what’s best for you!

Some people also use these loans for home improvements, which is a way to bring up the value of the home and, if you plan on selling it, a good way to finance improvements that may end up netting you more out of the sale.

Calculating how much you can afford on a home mortgage is a lot more complex than calculating how much you can afford in rent. In the latter case, a third of your income is usually a good measure for the most you want to pay in rent. Where a mortgage is concerned, you have to take some other considerations into account when you’re shopping around for houses.

Property Taxes

The amount you pay to finance the cost of the house is only the first part of determining how much the mortgage will actually cost you. You’ll also have to take into account the cost of property taxes in the area where you’re buying. Because this is an unavoidable expense, you have to factor it in from the start. If you don’t, you’ll almost certainly underestimate the costs you’ll pay each month.

Take the yearly taxes on the property and add a 12^th of that sum to your monthly payments as most people pay this monthly via their escrow account.  That way you avoid paying a large sum at one time each year to satisfy your property tax bill.

Homeowners, Flood & Mortgage Insurance

Homeowner’s insurance will be a necessity, as well. You’ll have to factor this into the cost of your home every month. Remember not to go by an average in this case. The homeowner’s insurance could be much more expensive if you live in an area that’s prone to flooding or to fires. This could vary by the neighborhood, so be sure that you’re making a good estimate of what you’ll have to pay.

Unless you show up with a very large down payment, you’ll also need mortgage insurance. This protects the lender from taking all of the risk if you should happen to default on the loan. You’ll have to factor this into the total cost of the mortgage, as well. Make sure your mortgage loan officer can explain this to you and make sure you understand the amount you’ll have to pay.

Debt to Income Ratios

Generally speaking, your mortgage should cost you somewhere between 28 and 33% of your gross monthly income. This cost has to include all the aforementioned expenses, as well as any others that may exist, such as neighborhood association fees and so forth.

The mortgage loan officers at NOLA Lending will be able to help you find a suitable loan that fits your income. One of the things that caused the housing crises was people buying way more than they could realistically afford. If you make smart decisions and buy within your means, a mortgage can be an affordable form of financing that offers you a lot of joy for the amount you pay every month.

Please contact us to assist you in calculating your estimated monthly payments!

If you have an adjustable rate mortgage or a home mortgage with rates that aren’t favorable, you may want to consider refinancing. Before you do, however, you have to take a look at your situation and see if it’s a good time to go through with it. Even though the rate will drop, there are some big considerations with this move that you have to take into account.

Has Your Credit Improved?

Your score is important and has an impact on your rate. If you’ve suffered financially in the last few years and your credit score reflects as much, you may want to still call so your lender can tell you what to work on. To get the most basic shortcomings on a credit report fixed:

• Bring all your accounts up to date
• Hold off on applying for any new credit such as credit cards or finance company loans

Some credit repair can be quicker than you think.

Are You Staying In Your Home?

Discuss it with your lender if you think you may have plans on moving within 5 years. They may offer you a different set of mortgage options to get the benefit of a better rate but keep the cost low with products like adjustable rate mortgages.

Talk to a Loan Officer

It’s important to talk to a mortgage advisor about your refinancing options and not just take advice from the neighbor or a family member!

The mortgage experts at NOLA Lending will listen to your situation and may advise that you consider refinancing to bring down your rate. There is sometimes a real financial need to take this step and to bring your rate down to an affordable level. Talking to an expert is the best way to find out what’s out there and how you can get credit in these rather tough times.