Mortgage – Rhodes Ranch Life

Mortgage Forbearance: A Helpful Option for Homeowners Facing Challenges

Valentina — Mon, 27 Jan 2025 01:32:53 +0000

Let’s face it – life can throw some curveballs. Whether it’s a job loss, unexpected bills, or a natural disaster, financial struggles can happen to anyone. But here’s the good news. If you’re a homeowner feeling the squeeze, there’s a lifeline that many people don’t realize is still available: mortgage forbearance.

What Is Mortgage Forbearance?

As Bankrate explains:

“Mortgage forbearance is an option that allows borrowers to pause or lower their mortgage payments while dealing with a short-term crisis, such as a job loss, illness or other financial setback . . . When you can’t afford to pay your mortgage, forbearance gives you a chance to sort out your finances and get back on track.”

A common misconception is that forbearance was only accessible during the COVID-19 pandemic. While it did play a significant role in helping homeowners through that crisis, what many people don’t know is that forbearance is still a tool to support borrowers in times of need. Today, it remains a vital option to help homeowners in certain circumstances avoid delinquency and, ultimately, foreclosure.

The Current State of Mortgage Forbearance

Forbearance continues to serve as a valuable safety net for homeowners facing temporary financial challenges. While the overall rate of forbearance has seen a slight increase recently, it’s important to understand what’s driving this change and how it fits into the broader picture.

According to Marina Walsh, VP of Industry Analysis at the Mortgage Bankers Association (MBA):

“The overall mortgage forbearance rate increased three basis points in November and has now risen for six consecutive months.”

This may seem concerning at first glance, but let’s break it down. The graph below, going all the way back to 2020, puts things into perspective:

While the share of mortgages in forbearance has significantly declined since its peak in mid-2020, there has been a slight but notable increase in recent months. This uptick is largely tied to the effects of two recent hurricanes — Helene and Milton.

Natural disasters like these often create temporary financial hardships for homeowners, making forbearance a crucial safety net during recovery. In fact, 46% of borrowers in forbearance today cite natural disasters as the reason for their financial struggles.

Even with the most recent uptick, the share of mortgages in forbearance is nowhere near pandemic levels, and, thankfully, reflects a very small portion of homeowners overall.

Why Forbearance Matters

Forbearance can help borrowers avoid the spiral of missed payments and foreclosure. It provides breathing room to address challenges and plan next steps. And while most homeowners today are not in a position to need forbearance, thanks to strong equity and foundations of the current housing market, it is an option for the few who do need it.

If you or a homeowner you know is facing financial difficulties, the first step is to contact your mortgage lender. They can walk you through the forbearance process and help you understand your options. Keep in mind that forbearance is not automatic — you need to apply and discuss the terms with your lender.

Bottom Line

In tough times, knowing your options can bring peace of mind. Forbearance isn’t just a financial tool — it’s a lifeline. And while the recent increase in forbearance rates might make headlines that give you pause, the truth is this option is working exactly as it should: helping those who need it most get through difficult moments without losing their homes.

Cancel Your Private Mortgage Insurance

Valentina — Fri, 22 Nov 2024 03:35:26 +0000

Understanding Private Mortgage Insurance (PMI)

Private Mortgage Insurance (PMI) is an additional cost that applies to homebuyers who make a down payment of less than 20% on their home. It’s essentially insurance for the lender, protecting them if you default on the loan, but the premiums are paid by you, the homeowner.

What is PMI?

Freddie Mac defines PMI as:

“An insurance policy that protects the lender if you are unable to pay your mortgage. It’s a monthly fee, rolled into your mortgage payment, that is required for all conforming, conventional loans that have down payments less than 20%. Once you’ve built equity of 20% in your home, you can cancel your PMI and remove that expense from your mortgage payment.”

As the borrower, you pay the monthly premiums for the insurance policy, and the lender is the beneficiary. Freddie Mac goes on to explain that:

“The cost of PMI varies based on your loan-to-value ratio – the amount you owe on your mortgage compared to its value – and credit score, but you can expect to pay between $30 and $70 per month for every $100,000 borrowed.”

According to the National Association of Realtors, the average down payment for all buyers last year was 13%. For first-time buyers, that number dropped to 7%, while repeat buyers put down 16% (no doubt aided by the sale of their homes). This just goes to show that for a large number of buyers last year, PMI did not stop them from buying their dream homes.

Here’s an example of the cost of a mortgage on a $200,000 home with a 5% down payment & PMI, compared to a 20% down payment without PMI:

The larger the down payment you can make, the lower your monthly housing cost will be, but Freddie Mac urges you to remember:

“It’s no doubt an added cost, but it’s enabling you to buy now and begin building equity versus waiting 5 to 10 years to build enough savings for a 20% down payment.”

Cancelling PMI

One of the best ways to save money is to eliminate PMI as soon as possible. Lenders are required to cancel PMI automatically once you reach 22% equity in your home, based on the original purchase price. You can also request cancellation when your equity reaches 20% if your loan is in good standing. Alternatively, you could refinance your mortgage to remove PMI if property values have risen significantly in your area.

Tax Deduction for PMI

For some homeowners, PMI payments may be tax-deductible, but there are income limits. If your adjusted gross income is $100,000 or less, you can deduct the full cost of PMI premiums. However, this deduction phases out as income approaches $109,000 and is not available if you earn above this threshold. This benefit can provide some financial relief, but it’s crucial to consult a tax advisor to confirm eligibility

Is PMI Worth It?

While paying PMI might feel like an extra burden, it allows you to purchase a home sooner without saving for a large down payment. Over time, as you build equity, the cost of PMI will no longer be necessary. For many, the ability to enter the housing market sooner and benefit from property appreciation outweighs the temporary cost of PMI.

Bottom Line

PMI can be both a stepping stone and an additional expense. By understanding its costs and strategies for cancellation, you can make the most of your investment while minimizing unnecessary financial strain. For more detailed information about PMI and its implications.

How to Hire a Contractor — and Avoid a Home Remodeling Nightmare

Valentina — Thu, 21 Nov 2024 17:22:18 +0000

Home Remodeling: How to Find and Hire the Right Contractor

Embarking on a home remodeling project can be both exciting and daunting. Whether you’re planning a simple refresh or a major overhaul, hiring the right contractor is crucial to ensuring a successful outcome. Here’s a guide to help homeowners navigate this process effectively.

Start with a Clear Plan

Before reaching out to contractors, define the scope of your project. Understand what changes you want to make, the materials you prefer, and your budget. A well-thought-out plan will help you communicate your needs clearly and avoid misunderstandings during the bidding process.

How to Find a Home Remodeling Contractor

Referrals — from neighbors, friends, or others —are a common source when looking for a remodeling contractor. Real estate professionals also recommend contractors and may offer extra assurance from their well-vetted network.

Before you hire a contractor, schedule three to five in-person interviews, gather bids, and thoroughly check the background of any you’re considering. Google the contractor’s name and their business. See what turns up and if they have any complaints or lawsuits filed against them.

Check online reviews on Yelp, Angi, NextDoor, and elsewhere, but don’t base your decision only on those. I have been a victim on costly scam myself from a “friend” and will recommend to proceed with caution. Review sites are not all made equally, and not all reviewers are actually customers. Some review sites let anyone post reviews about the company.

Instead, I will recommend focusing on Better Business Bureau reviews and ratings. Companies pay to be a part of the BBB, and when the customer complains about services rendered, the BBB has to do an actual investigation of the situation. If the company has a bad BBB rating, this means they likely have failed to satisfy real customers who had real experiences.

You can also find out whether a contractor you’re considering has been certified by an industry organizations. For example, certification by the National Association of the Remodeling Industry recognizes highly experienced remodeling professionals who are capable of planning and managing complex remodeling projects. NARI offers a consumer search tool at its site to find remodelers in your area who’ve also agreed to abide by NARI’s code of ethics for professionalism.

Questions to Ask a Remodeling Contractor

Download as PDF

Experience

How many properties have you remodeled/flipped?
How long have you renovated homes?
How did you learn this trade?
What do you specialize in?
What makes you different from other renovation professionals?

Licensing, Insurance, and Bonding

What type of license do you hold?
How much insurance do you carry, and what does it cover?
Does your insurance cover anyone you hire as a subcontractor?
Are you bonded?

Project Costs

How detailed are your quotes?
Can you share a quote from a project you recently worked on so I can see how detailed it is?
Does your quote include materials and labor?
If your quote includes materials, do I have a say about the material selection?

Work History

Do you have pictures of projects?
Do you have at least three references?
Have you ever had a project go over money and time budget? If so, tell me about it.
Have you ever had an unhappy client, and how did you deal with it?

The Scope of the Project

Is there anything you can’t do regarding the project I’m proposing?
Do you subcontract anything to others?
Who do you hire as subcontractors?
How do you ensure the quality of your subcontractors’ work?
Do you pull permits?
How are you paid?
What percentage do you put into the project for possible incidentals?
Why do you think I should hire you for this job?

Why Remodeling Contractors Should Be Licensed, Bonded, and Insured

Being licensed, bonded, and insured can lend credibility to contractors and offer protection to homeowners, but these credentials come with some limitations, according to Rudin.

Licensed: The company has registered their business operations with the state contractor’s registrar. Some licenses allow a contractor to do one kind of work, but not another. It’s important to know the differences between these levels of licensure and what your specific project requires. Do a License Search at Nevada State Contractors Board
Bonded: This means they have a surety bond, so if your home is damaged, the bond will cover the loss. This is important because if the company isn’t bonded and an accident occurs, you’ll be on the line for the cost of repairs.
Insured: The company is protected against various risks and liabilities, such as if a worker has an accident on the job site or if they caused some sort of professional mistake.

8 Red Flags to Look for in a Remodeling Contractor

When you’re interviewing, background checking, or starting a relationship with a remodeling contractor, be leery of these eight red flags:

Vague contracts: A written contract should spell out the scope of the work, materials, payment schedule, change orders, etc. If a contractor gives you a contract that is only one or two pages, that’s a red flag.
Lack of consumer protections: A contract should protect you, the homeowner, as well as the contractor. Offer a contract addendum if needed. It is recommended to include a clause that allows you to fire a contractor for shoddy work or for failing to show up at the jobsite for a specified time. Also, it is recommended the contract calls for a change order to be signed by both parties for any added fees. That will help avoid surprise invoices.
Large down payments: The contract should outline a payment schedule based on work milestones, such as when framing is completed or rough plumbing or electricity is installed. It is a red flag: having to pay $30,000 before work even started. In Nevada, all that is required is 10% or $1,000, whichever is less. Negotiate that upfront cost because if you give away too much money right off the bat, they could drag their feet or use your money for another project.
Refusal to pull permits: Many remodeling projects — like for fireplaces, outdoor kitchens, and room additions — require a permit from the city or county to ensure they’ll be completed up to code. Most remodeling contractors will file these on your behalf, but be cautious of those who don’t; it may be a sign they’re unlicensed. It is recommended having the contractor pull any permits because whoever obtains and signs for the permit is responsible for everything, including fees and fines if something ever goes wrong.
Lack of communication: If you never spoke to the contractor until after you hired him and had to communicate through a salesperson first, it is a red flag. It is recommended to add the contract detail the frequency of communication.
Failure to address lien waivers: A lien waiver can help protect homeowners in large remodeling projects. This ensures a contractor’s supplier can’t place a lien on your property if the contractor fails to pay the supplier a “mechanics lien” can be placed on your home during the remodel for this reason. The Lien can affect your ability to sell the home until it is resolved.
Low estimates: Homeowners may be tempted to choose the contractor with the lowest bid, but be skeptical. Low bids tend to be vague. They tend to just offer vague references to painting, plumbing, and electrical, with nothing broken out about the scope of work or materials used. Make sure costs are detailed.
Lack of professionalism: It may seem judgmental to assess the quality of a contractor by their appearance and first impressions, but it can be one indicator in your toolkit. If the contractor arrives late or is continually difficult to reach, that reflect on how they’ll handle your project.

Bottom Line

Looking back on my unfortunate experience I likely could have avoided some of my remodeling nightmare by spotting the red flags. Those include the lack of communication, vague contracts, and the requirement to put down too much money upfront. So, if you start to notice something isn’t right, communicate that right away to the contractor. Always follow up with a written letter that summarizes what you said and uses language like, ‘I appreciate your help,’ or ‘I appreciate your attention to this,’ and ‘I look forward to getting this resolved.’ Document and take photos.

If you come to the point to file a complaint with the Nevada State Contractors Board here is were to go to start the process