The Rueth Team - Denver's Top Mortgage Company
By Nicole Rueth - June 12, 2019
Nicole Rueth, Producing Branch Manager for The Rueth Team - Fairway Independent Mortgage Corporation
When in the process of purchasing a home – do you know what gets factored into determining your mortgage rate? The interest rate is one piece of the overall financial mortgage solution. Since mortgage rates can impact the long-term cost of purchasing a home, it’s important to understand why they can adjust.
While mortgage borrowers, of course, seek the lowest possible rates, mortgage lenders have to manage their risk through the interest rates charged. There are many external and personal factors that affect your individual mortgage. Though there are several factors you can’t change, it’s still good to know where these rates come from in order to have a better understanding as you begin the home-buying process. Here are some of the key items that factor into your mortgage rate.
The Federal Reserve Monetary Policy: The Federal Reserve does not set the specific interest rates in the mortgage market. However, its actions in establishing the Federal Funds rate and adjusting the money supply upward or downward have a significant impact on the interest rates available to the borrowing public. Generally, increases in the money supply put downward pressure on rates, while tightening the money supply drives rates up.
Housing Market Trends: Trends and conditions in the housing market also affect mortgage rates. When fewer homes are being built or offered for resale, the decline in home purchasing can lead to a decline in the demand for mortgages, bringing interest rates down. There is also an increasing number of consumers opting to rent, contributing to the downward pressure on rates.
The Overall Economy: Interest rates influence economic behavior as well. In a low interest rate environment, businesses are eager to borrow, make capital expenditures, expand their businesses and hire more employees. Personal wealth rises and encourages even more spending. The housing market booms during periods of low mortgage rates. As interest rates rise, the cost for such expansion becomes ever more expensive – businesses become more cautious, discontinue plans for expansion and often begin laying people off. As a result of these mortgage raises, housing construction weakens and home sales typically become sluggish.
Credit Scores: Making sure you have your credit in the best possible condition before securing a mortgage will go a long way in your favor. As a rule, people with higher credit scores have lower mortgage interest rates and vice versa. Lenders use credit scores to predict how reliable you’ll be in paying your loan. Credit scores are calculated based on the information in your credit report, including, your payment history, balances, available credit, and mix of credit (including credit cards, installment loans, and mortgages). We have a free credit optimization service for our clients if you feel your credit score has room to improve.
Loan Amount and Down Payment: The amount you put down and your purchase price can impact your interest rate. Loan to Value is a factor of the loan amount divided into the purchase price. Putting less than 20% down can actually give you a better interest rate, but also usually includes mortgage insurance. Putting more than 25% down will also give your interest rate a boost in the right direction.
Loan Term: Just as a larger down payment can decrease your rate, so can picking a shorter loan term or duration. In general, shorter term loans have lower interest rates and lower overall costs as you’re not accumulating more over an extended period of time.
Interest Rate Type: Home interest rates come in two types – fixed and adjustable. Fixed rates don’t change, whereas adjustable rates do fluctuate each period based on the market. Though the initial rate may be lower with an adjustable-rate loan, that rate might increase significantly later on. Make your decision about the type of loan based on how quickly you intend to pay off your loan.
Loan Type: Different loan products will carry different interest rates based on being insured or guaranteed by government agencies. USDA, VA, and FHA loans typically carry the lowest interest rates. Conventional and Jumbo loans will have slightly higher interest rates but when paired with higher credit scores offer significant advantages.
Like many economic trends, mortgage rates are a game of supply and demand. Factors such as economic growth, the Federal Reserve's monetary policy and overall market trends can largely impact what mortgage rates look like, and most of these factors we cannot individually control. However, your financial health will also affect the interest rate you receive, so do your best to make that as healthy as possible!
The Rueth Team is here to help you better understand what you can do to get the best mortgage rate possible today. Give us a call!
By Nicole Rueth - May 22, 2019
By Nicole Rueth - May 15, 2019
By Nicole Rueth - May 14, 2019
Lottery tickets, casinos, and primetime game-shows awarding seven-figure prize monies. What do these activities have in common? A glimmer of hope for instant wealth, overnight financial success. The promise to “Get Rich Quick!” touts seemingly easy effort on your part, and minimal risk for utmost reward.
On the other hand, building wealth through real estate is tactical. Building wealth through real estate takes time, and the real estate road to long-term financial wealth harbors no shortcuts.
How much time building your wealth takes is dependent on YOU and the steps taken today to pave the way for a financially-secure future for you and your loved ones. Instead of looking for shortcuts to financial security, channel that energy into proven real estate investment methods with demonstrated success in building wealth.
One of the most common statements heard when exploring real estate as a vehicle for building wealth is, “I just have no idea where to start.” Though arguably not as ‘easy’ as purchasing a lottery ticket, utilizing real estate to plan for your financial future does not need to be a tedious and overcomplicated process, nor a confusing, intimidating conversation, avoided simply due to lack of understanding. As it turns out, a little determination and due diligence can go a long way in building your wealth through real estate. Here’s a back-to-basics refresher on how to get started.
One of the keys to success in building long-term wealth is preparing for the future. Establishing and maintaining healthy savings and minimal debt are critical to lasting financial security.
A variety of easy-to-opt-into savings account plans are readily available to you, individually and through many employers. 401(k)s, 403(b)s and IRAs are some of the most common plans, think of these kinds of retirement accounts as your first line of defense in financial planning. There’s an added benefit to participating in an employer-provided retirement account if the employer offers a match, increasing the value of your savings.
Paying down your debts is also essential when preparing to build your wealth through real estate. Credit card balances, student loans, car loans - these debts factor in to determining other pre-qualifying metrics used for gauging creditworthiness, like a FICO score. In turn, FICO score affects what mortgage rates you may qualify for.
Define Your Goals
There are plenty of ways to build wealth through real estate, and defining your goals can help determine which approach best aligns with your endgame.
The following questions may assist in setting realistic investment goals when building wealth through real estate:
What makes a particular real estate investment attractive to you? How would you define a successful investment?
How much time do you have available to devote to your real estate investment? Do you have the time and expertise to invest actively, or would it make more sense for you to invest passively?
What’s your investment timeline? And, how important will liquidity be to you in the future?
Depending on your familiarity with real estate investment options, sometimes this step and step three can occur simultaneously, or in interchangeable order.
Seek Counsel from the Pros
Whether you are new to the world of real estate investments, or a seasoned vet, market trends and industry regulations are dynamic; seeking counsel from industry professionals such as your REALTOR®, lender, financial planner or CPA will set you up for success in your pursuit of building wealth through real estate.
A team of professionals can help answer the above questions to better help define your investment goals, and other big picture questions like “How will real estate affect your overall portfolio?” or “What are the potential tax benefits?”
Just as well, your team can help you hone in on more targeted planning, answering questions such as “How much of a down payment and mortgage do you need to get started?” and “How much additional capital will you need in the future?”
Should you continue to add to investment properties to your portfolio, you can bet on working with the same people throughout your transaction processes, so be selective in assembling your team. These should be masters of their field and people you can trust.
Develop a Plan: Choose Your Investment Track
Keeping your goals in mind, together with your advisory team you can now choose your real estate investment track. This is where factors like financing options, property type and location come to a crossroads, helping to further develop a plan catered to your needs. Wholesaling, Rehabbing and Rental Properties are three popular tracks for building wealth through real estate. Each of these offers different models for building wealth through real estate, though again, the track you choose should be reflective of the realistic goals you’ve set.
5. Be Adaptable - Adjust As Needed
The real estate industry is an evolving, dynamic system. Develop a plan for your endeavors to build wealth through real estate, but be adaptable to market fluctuations and changes that will impact your investments. Leave room in your plan for versatility. There are a wealth of resources available to help you remain abreast of industry news - local and national. Remain in regular contact with your advisory team, and don’t hesitate to ask for help or clarity if ever you feel overwhelmed or unclear about the status of your real estate investments.
Overnight financial success is an alluring theme that has withstood the test of time. There’s a reason why the age-old trope of wish-granting, bottle-dwelling genies has long been woven into the plot of children’s stories, books and movies. The reality is that more often than not, the myth of overnight financial success is just fiction - plain and simple.
And sure, the probability of winning the lottery is roughly 1 in 13,983,816. Technically, yes, there is a chance that you could keep on buying Power-Mega-Super Ball tickets and be that ‘lucky’ winner, a champion of overnight financial success. However, in much less time than you might spend waiting for your numbers to be called, you could be taking advantage of numerous, proven methods and resources available to you for building wealth through real estate, with outcomes much more favorable than 1 in (nearly) 14 million.
As an owner of 23 investment properties and educator of multiple popular investment workshops, Nicole Rueth an her team at Fairway Mortgage is here to help you build wealth through real estate. Get in touch with us to see how you can get started securing the financial future for you and your family.