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Home Buying Tips

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Whatís the difference between a prequalification letter and a preapproval letter?
by goldcoast on 




According to the Consumer Financial Protection Bureau the answer is prequalification and preapproval both refer to a letter from a lender that specifies how much the lender is willing to lend to you, up to a certain amount and based on certain assumptions. These letters provide useful information, but are not guaranteed loan offers.

Thereís not a lot of difference between a prequalification letter and a preapproval letter. While there are some legal distinctions, in practice both terms refer to a letter from a lender that says the lender is generally willing to lend to you, up to a certain amount and based on certain assumptions. This letter helps you to make an offer on a home, because it gives the seller confidence that you will be able to get financing to buy the home. It is not a guaranteed loan offer.

Donít worry about which word lenders use. Some lenders may use the word ďprequalification,Ē while other lenders may call the letter a ďpreapproval.Ē In reality, lendersí processes vary widely, and the words they use donít tell you much about a particular lenderís process. The important thing is that the letter you receive provides enough information for sellers in your area to take it seriously. The best way to make sure that the letter you have will serve its purpose is to ask a local real estate agent.

Lenders usually check your credit when issuing a prequalification or preapproval letter.Many people wait to get a preapproval letter until they are ready to begin shopping seriously for a home. However, getting preapproved earlier in the process can be a good way to spot potential issues with your credit in time to correct them.

Since 1999 GoldCoast Mortgage Service, Inc. has arranged over 6,000 error-free, on-time, delivered mortgages at exceptional terms from our Cummings Center, Beverly, MA location. We have had the same phone number for 19 years and are in the top 70 of earliest licensed mortgage companies in the nation. In an age of technology-based applications you will find our guidance, knowledge, and process very enlightening, comforting and efficient. GoldCoast Mortgage Service, Inc. agents are licensed and arrange residential and commercial mortgages in MA, NH and ME.

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Mortgage Bubble 2019?
by goldcoast on 

Mortgage Bubble

In 2008 when the real estate rollercoaster clack, clack, clacked its way up to the peak there was too much going on for most people to be aware the drop was imminent, myself included.


In 2019 Iím asked on a daily basis if we are in the equivalent of an iridescent bubble floating towards the gleaming point of a pin prick; or are we on a hot air balloon that will gently float back down to the ground? Or will real estate continue to grow in value in the short term?


Consider these contradictory headlines posted recently.


U.S. pending home sales post surprise drop as market struggles

Contract signings to purchase previously owned U.S. homes unexpectedly fell for a second month in November, offering yet another sign that the housing market is struggling.
Read the full article:

November home prices hit record high
More single-family homes were sold in Massachusetts last month than in any previous November and the homes sold for a higher median price than in any November before, according to real estate market analysts.
Read the full article:


Pop or a float, the general consensus is that a major real estate correction is coming. Almost everyone seeís or senses it, even folks without a real estate interest.


So what do we do? How to we benefit from a reset? And how do you protect yourself?


  • If you have a relocation move coming up, consider liquidating sooner and move into a rental.
  • If you have an optional purchase coming, consider letting the heavy traffic subside, and merge in as the flow slows in the months to come.
  • If you have a HELOC you may be aware of your 19.99% rate cap, or the fact that your payment will quadruple once the draw period ends (when you go into a 10 year repayment period). If values drop enough you will lose your ability to refinance or consolidate this HELOC debt. Addressing this now will give you more options and flexibility in the months and years to come. The country saw this phenomenon several million times over when adjustable rate/interest only mortgages were a hot topic in the last decade.
  • Be frugal. With your purchase price. With you monthly expenditures. With your improvement goals on the house. Donít overpay for a home purchase Ė strike on your purchase with poise and patience Ė but donít let the emotional game control you.
  • Try to avoid PMI by pursuing a CRA eligible home which has no PMI expense. View our curated list of local CRA eligible homes HERE.
  • Donít waste money on improvements that donít build equity or provide utility. Consider kitchen cosmetics in lieu of a full upgrade. Visit your friends man cave instead of building your own.
  • Donít count on HARP or Quantitative Easing to bail anyone out. Those programs are closed/closing (although we are paying back HARP for decades to come). Those occurrences including mortgage modification may not be available next round requiring anesthesia over 2008ís aspirin.
  • Spread the word. Thereís a younger generation coming up into home ownership. Donít let them be the generation that needs to delay retirement by a decade. Housing should be a thoughtful, deliberate process not an impulse or quick decision. Coach and counsel them.
  • Adhere to your mission and donít become involved in someone elseís mission or motives.


Since 1999 GoldCoast Mortgage Service, Inc. has arranged over 6,000 error-free, on-time, delivered mortgages at exceptional terms from our Cummings Center, Beverly, MA location. We have had the same phone number for 19 years and are in the top 70 of earliest licensed mortgage companies in the nation. In an age of technology-based applications you will find our guidance, knowledge, and process very enlightening, comforting and efficient. GoldCoast Mortgage Service, Inc. agents are licensed and arrange residential and commercial mortgages in MA, NH and ME.

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Community Reinvestment Act (CRA) Ė why itís a winning lottery ticket.
by goldcoast on 

Until I found out it was akin to a winning lottery ticket, the Community Reinvestment Act (CRA) elicited thoughts of compliance, mortgage guidelines, and a product way too technical in nature.

When I learned that criteria to quality for the benefits were NOT tied to an income restriction and property addresses in Beverly, Salem and Peabody, MA contained eligibility into the program my opinion changed. My colleague Jeff summed it up nicely by saying Bill Gates could qualify for a CRA mortgage if the home was in one of the zones. You canít earn TOO much.

Why is CRA so great?
Well first of all, it allows a low-down payment (3%*), but it doesnít zing you for Private Mortgage Insurance, also known as PMI. PMI is an expense that can last for a decade and burden you with an extra $200 to $400 a month. In other words the rate doesnít increase to put 3% down versus saving for 20% down.

Secondly, the rate is better. CRA is itís own raw rate, exempt from Loan Level Pricing Adjustments (LLPA). LLPA will creep their way in to most pricing quotes and for anyone without a 40% down-payment or a 720+ FICO an interest rate premium would apply (but not in CRA land).

How Does that equate into winning the lottery?
If we could classify scratch tickets as a lottery product (it is). Then the combined saving of a lower rate and absence of PMI add up to $47,859 for a $400,000 loan amount. We suspect that amount could alter the quality of life for some buyers. About the equivalent of some scratch ticket winnings that would excite most people.

See the list of CRA eligible properties in Beverly, Salem and Peabody, MA by clicking HERE.

*Subject to these conforming loan limits for Essex County: 1 family loan limit is $483,350. Add a 3% down payment and that comes out to a PURCHASE price of $498,300. 2 family loan limit is $620,200. Add a 5% down payment and that comes out to a PURCHASE price of $652,800. Contact our team to help determine your eligibility as a buyer into this program. All homes subject to prior sale . PMI = Private Mortgage Insurance


Since 1999 GoldCoast Mortgage Service, Inc. has arranged over 6,000 error-free, on-time, delivered mortgages at exceptional terms from our Cummings Center, Beverly, MA location. We have had the same phone number for 19 years and are in the top 70 of earliest licensed mortgage companies in the nation. In an age of technology-based applications you will find our guidance, knowledge, and process very enlightening, comforting and efficient. GoldCoast Mortgage Service, Inc. agents are licensed and arrange residential and commercial mortgages in MA, NH and ME.

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Is a Simultaneous Closing on a Home Purchase Difficult?
by goldcoast on 

Is juggling difficult?
Not for a juggler, but someone learning to juggle wouldnít want to perform in front of an audience with bowling pins. The closest personal juggling project to buying-and selling a home on the same day is probably having a wedding. What makes a wedding complicated is the number of professional and personal parties and interests involved.
Real estate and financing a home are governed by a lot more rules, laws, mandates, and procedures than a wedding. Thereís also other households (and their children, pets, furniture, and boxes) that are involved in selling your home and then buying the next one.

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What is a Bridge Loan?
by goldcoast on 

A Bridge Loan is a second position mortgage on your outbound (former) primary residence. It is designed to extract equity from the departure residence to be used as a down-payment on the destination (future) primary residence.

How do I get a Bridge Loan?

In an ideal world you will never need one, or really want a Bridge Loan. It means that the project you are trying to accomplish is reactionary and not being proactively led.

Before circuit breakers were invented, a carefully placed penny could be used to circumvent the need for a fresh fuse if one was not available. The danger being that the circuit now could cause a fire if overloaded but allows your electricity to function. 

There are several natural circuit breakers in the home sale/buy process. For instance, if you canít sell your home then the lack of sale will prevent you from going on to the next purchase. There are more reasons potentially causing this that I don't have space to list here.

A Bridge Mortgage functions as the penny and allows you get into the new home while still carrying the old one.

At a minimum you will be handling and accruing interest on three mortgages, one of them with a balloon/demand feature. Tick tock Ö.

If you come into the need for a Bridge Loan, you should talk with us. We have provided guidance and consider ourselves experts in explaining the pros and cons of Bridge financing, as well several alternative solutions in lieu of the penny in the fuse panel. 


GoldCoast Mortgage, Inc., is one of the earliest licensed mortgage corporations in the nation. GoldCoast was founded, and fiercely protects, their extreme service model which puts the clientís needs ahead of corporate needs. In an age of technology-based applications you will find their guidance, knowledge, and process very enlightening, comforting and efficient. GoldCoast Mortgage Service, Inc. agents are licensed and arrange residential and commercial mortgages in MA, NH and ME.

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How do I get rid of PMI?
by goldcoast on 

Mortgage Insurance is a necessary step for getting into a home without putting a 20% down-payment. For the sake of this article lets posit you have a monthly mortgage insurance expense that is getting very tiring.

First up you need to ascertain if you have a conventional mortgage or a FHA mortgage (VA mortgageís, do not have monthly mortgage insurance). USDA and MassHousing require a separate explanation.

Letís start with a conventional mortgage (non-government mortgage). The FHA explanation on itís own MIP is another chapter that will come later. You pay mortgage insurance against your potential default. It is an insurance, thatís the ďIĒ in the acronym. While you derive a benefit from PMI (your ability to buy a home without a 20% down-payment) the insurance isnít for your protection. This is important to think about. Youíre not PMIís customer the lender is, even though you pay for it.

Since there are several PMI providers the removal rules will vary between customers but here are the three techniques that will drop PMI:

I. PMI DROPS AUTOMATICALLY
The dispatch date is pre-loaded into your amortization schedule with the lender. The payment after that date will not have the PMI payment. No action required. No call to your lender, or appraisal required. It is simply over. To figure out that date, take your purchase price and multiply that .78. Obtain (or create) an amortization table and slide your finger down to the value. The date that corresponds to that number is your last PMI payment. Congratulations. If you need help with an amortization table please ask us.

II. THE TIDE RISES
The sale prices for your neighbors houses have done up, way up. Like 20% up. This leads you to believe your house may have enough equity to ditch PMI. But that wonít happen on itís own. If you want to supersede the PMI contract you need to follow the PMI contract (see a sample on our website). You will probably need to obtain that. Step one is to obtain that contract or those instructions from your lender.

Review the rules presented to see if you are ineligible for PMI removal any reason (you must meet minimum time under PMI and cannot be past due on your mortgage). Youíll also notice that the bar may have been moved. Typically from .78 to .75 (but again each PMI company is different) which would require 25% equity. Do you think your mortgage lender will take your word on the value? Of course not. Youíll need to prove that via an appraisal at your own expense (est. $500). The appraisal needs to be performed by a licensed appraiser on the lenderís approved list, not your brother in law the realtor. Once you state (and prove) your case you can expect PMI to drop from you monthly payment and free up your cash flow. Congratulations Ö itís like getting a pay raise.

III. CUT THE LINE
You receive a sum of money from a bonus, tax refund, gift or inheritance and apply it to your mortgageís principal there for accelerating the amortization schedule and your position in it. While this moves you closer to your equity position it does not change the dispatch date. From here you need follow steps listed in THE TIDE RISES paragraph.

Regardless of which path you take the efforts are very worth your while. This endeavor may be your highest paying use of your time in 2018. Good luck. The GoldCoast Team is here to help. Any time and with even a hint of obligation to engage our services.

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When is the best time to refinance my HELOC?
by goldcoast on 
 

The best time to refinance your HELOC is now with the recent 2018 tax cuts to the home equity line interest deduction.  


Home Equity Lines of Credit often offer Sale rates Ė basically a low-rate that increases after year one. That low rate year encourages you to stack balances onto the HELOC that will take many years, perhaps decades to pay off.  


A common misconception is that you can jump from a HELOC to a fixed rate mortgage before mortgage rates increase.  Prediction of that dispatch date is difficult. The misconception arises from the fact that rates of a Fixed mortgages and HELOCís are driven by different forces.  


A HELOC rate is derived from a human controlled index, (The Federal Reserve sets the Prime Lending rate) whereas the mortgage rates are derived with the Yield of the 10-year Treasury Bond. Because bonds are a traded product they are market driven. Market driven products can rise or fall, without caps, at any time. There is no direct human influence on mortgage rates Ė only market influences.1 


Predicting the direction of mortgage rates requires knowing the direction of the 10-year treasury bond (a debt instrument). Knowing the direction of the 10-year bond would require knowing the how the stock market (equities) is going to perform. The investment cycle is complicated and routinely predicted wrong by Ivy League educated, seven figure earning traders.


So how do we guard against bumping into the 19.99% cap on your Home Equity Line of Credit. You posture defensively. Inquire about converting your balance to a fixed Home Equity Loan through your existing provider. If the rate that provider offers isnít palatable please talk to us about a no obligation refinance rate quote. We have offering that include No Closing Costs and all of our products, including Jumbo, come as fixed rates.  


CLICK HERE FOR FREE MORTGAGE ADVICE


John Donlon is the Co‐Founder of GoldCoast Mortgage, Inc., one of the earliest licensed mortgage corporations in the nation. GoldCoast was founded, and fiercely protects, their extreme service model which puts the clientís needs ahead of corporate needs. In an age of technology-based applications you will find their guidance, knowledge, and process very enlightening, comforting and efficient. GoldCoast Mortgage Service, Inc. agents are licensed and arrange residential and commercial mortgages in MA, NH and ME.  


1. Quantitative Easing was an exception to this. This is when the government purchased its own bonds, attempting to keep rates low. It worked Ö for a period of time. We are now engaged in the unwinding effect of that phenomena.  


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Should I refinance my HELOC?
by goldcoast on 
Yes, there is no better time to refinance your home equity line of credit. The recent 2018 tax cuts eliminated the interest deduction entirely on HELOC loans. 


Many people we talk with donít realize that a Home Equity Line of Credit (HELOC) is by definition two things: 


- A mortgage secured by a primary residence.


- Always an adjustable rate. If the debt has a FIXED interest rate then it is a Home Equity Loan (not Line). 


Home Equity Lines of Credit often offer sale rates Ė basically a gimmick low-rate to get you started which increases after year one. That low rate year encourages you to stack balances onto the HELOC that will take many years, perhaps decades to pay off.  


When advising on debt secured against your house we recommend matching the product with the financing (need) timeline.  


For instance, when building a home up to two years to draw on a line of credit is preferable. Remodeling kitchens or other structural work should be a one-year project. Many people use a HELOC to fund college tuition which can be four years or longer. 


Remember keeping an active balance on an adjustable rate past the draw period incurs interest rate risk.  


Common caps on HELOCís are 19.99% and almost all HELOCís have a trigger demand feature that calls for the balance to be paid back in 120 months. A $100,000 balance at the full rate would ďdemandĒ a $1,931/month payment every 30 day for a full decade.  


Therefore, we recommend converting the HELOC into a fixed interest rate loan as soon as the project need is completed. Especially now when the interest paid on the HELOC is no longer tax deductible. 


CLICK HERE FOR FREE MORTGAGE ADVICE


John Donlon is the Co‐Founder of GoldCoast Mortgage, Inc., one of the earliest licensed mortgage corporations in the nation. GoldCoast was founded, and fiercely protects, their extreme service model which puts the clientís needs ahead of corporate needs. In an age of technology-based applications you will find their guidance, knowledge, and process very enlightening, comforting and efficient. GoldCoast Mortgage Service, Inc. agents are licensed and arrange residential and commercial mortgages in MA, NH and ME.  

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Happy New Year
by goldcoast on 

Be at war with your vices, at peace with your neighbors, and let every new year find you a better person. Benjamin Franklin

As the year fades, life gives you another year to surprise the world with your talent; work hard and think big. We hope 2018 fills your life with success, kindness, and good luck.
The GoldCoast Mortgage Team

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How do I redo my Home Equity Line of Credit (HELOC) to make it tax deductible in 2018?
by goldcoast on 

The Trump tax cuts have eliminated the real estate tax deduction over $10,000 for 2018. This caused the mad rush at city and town halls the last few weeks to pre-pay 2018 real estate tax.


For folks who do not have a tax liability over $10,000 this does not seem like a smart play. Additionally, the IRS is saying they wonít allow the deduction in 2017 on tax billings that were not in 2017.


One big change not to be overlooked by anyone with a balance on their Home Equity Line of Credit is the cut to the interest deduction on a HELOC. It appears that the interest paid on a HELOC (established both before or after 2018) will not be deductible.


The old and new mortgage deduction law is outlined nicely in A Guide to 2018 Tax Changes published recently by The Annenberg Public Policy Center. The article is a valuable resource and covers all aspects of the tax law changes in 2018 from the Tax Cuts and Jobs Act.


Mortgage Deductions 


Previous law: Taxpayers who itemize their taxes can deduct interest payments on mortgage debt of up to $1.1 million. That includes up to $100,000 of home equity debt.

New law: For current mortgage holders, there is no change. But the deductible limit drops to $750,000 for new debt incurred after Dec. 31, 2017. Also, homeowners may not claim a deduction for existing and new interest on home equity debt, beginning Jan. 1, 2018. The mortgage deduction changes expire after 2025.


If you're carrying a balance on your HELOC it may prove best to convert it to a primary fixed rate mortgage as early in 2018 as possible. Primary mortgages (in first position) will be deductible up to $750,000. There does not appear to be a difference between a first mortgage that was used to acquire your residence or one that was used to consolidate a HELOC (refinance).  


Consulting with your accountant or tax professional is recommended prior to engaging in any financial strategy.  


CLICK HERE FOR FREE MORTGAGE ADVICE


John Donlon is the Co‐Founder of GoldCoast Mortgage, Inc., one of the earliest licensed mortgage corporations in the nation. GoldCoast was founded, and fiercely protects, their extreme service model which puts the clientís needs ahead of corporate needs. In an age of technology-based applications you will find their guidance, knowledge, and process very enlightening, comforting and efficient. GoldCoast Mortgage Service, Inc. agents are licensed and arrange residential and commercial mortgages in MA, NH and ME.  

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