Author: First Western Trust Bank

How to Finance a New Home Build

Posted on by First Western Trust Bank

Are you seeking to move into a new home but finding it difficult to find a house that truly appeals to you? With limited inventory, some homes may meet some of the criteria on your list, but not all. Some turn to financing a new home build to ensure their house meets all their needs.

With a new build home loan, also referred to as a construction loan, you can have your dream home built according to your specifications. Financing a new construction home differs from getting approved for a traditional mortgage. Here’s what you need to know about getting a construction loan, how it works, and how much it will cost.

What is a Construction Loan

Financing a new home build can be done quickly with a construction loan. This type of loan, which might also be referred to as a new home build loan, is a short-term loan that provides the necessary financing to have a new home built. Construction loans typically have a higher interest rate than traditional mortgage loans, but as they are short-term, they are paid off much quicker.

How Do Construction Loans Work?

If you have been wondering how to finance a new home build, consider taking out a construction loan. A new home build loan can fund a number of things related to a new home build, including not just the cost of the building materials but also the labor involved, any needed permits, and even the purchase of the land.

When financing a new home build, you will need to find a bank or lender that offers construction loans. If the loan is approved, financing is provided in stages, and you can begin using the funds as you need them for financing a new construction home.

As the home is being built, you will repay only the interest on the loan. During construction, an inspector or home appraiser will make routine visits to determine if more funds need to be authorized. When the new home is complete, you will be required to pay off the remainder of the loan.

Understanding a One-Time Close and a Two-Time Close Loan

There are two main types of new build home loans you can apply for. The first and most common is the one-time close loan. With this construction loan, the loan terms, such as monthly payments, interest rate, and length of the construction phase, are pre-determined. When the construction is complete, the loan is then converted to a traditional mortgage, and you begin paying both interest and the principal as initially determined.

The primary benefit of the one-time close loan is that you do not need to apply for a mortgage after the home is built. The two-time close loan differs because you must pay off the construction loan when the home build is complete. Then, if you still require financing, such as for additions or changes to the home that was part of the original plan, you will need to apply for a mortgage. The upside to a two-time close loan is lower rates initially and more flexibility, but the downside is paying closing fees again.

How to Finance a New Home Build

Applying for a construction loan can be tedious, perhaps even more so than applying for a mortgage. You will need to provide ample documentation about your home construction project, a timetable, and a budget that reflects the work to be done.

Working with an experienced builder can significantly facilitate some of the hassles, as they can provide you with all the necessary documentation related to the building details.

It will help if you are also prepared to pay a lender a 20% down payment on the loan. You can alleviate some of the loan cost if the land is already owned or purchased separately, as the land purchase is often one of the most expensive components of financing a new home build. You can often buy land separately with a land loan if need be.

Final Thought: Is a Construction Loan the Right Choice For You?

If you are considering building your own home, carefully research and plan to ensure you secure the right type of financing that works for you.

Whether planning your first home purchase or seeking to build a new home, speaking with a knowledgeable and experienced mortgage expert can help you better make an informed decision.

How To Choose A Mortgage Lender

Posted on by First Western Trust Bank

A property purchase often ranks as one of the biggest purchases in a person’s life. Under most circumstances, for financial or investment reasons, it is recommended that the buyer take out a mortgage to fulfill their big-ticket payment. Determining how to choose a good mortgage lender remains critical for accessing the most suitable arrangement.  

Therefore, before settling for a mortgage, buyers need to reach out to a financial provider that offers the right plan for their needs. A buyer planning to make their first home purchase has different financial priorities and refinancing strategies than a high net worth individual (HNWI) interested in accruing multiple property investments. 

By discussing your mortgage objectives and options with a reliable financial provider and carefully choosing the appropriate plan, you can greatly enhance your long-term cash flow and profitability.

Prioritize Trust

Trust remains vital when reaching out to any mortgage lender. Quality lenders should have proven track records for reliable mortgage services at reasonable interest rates.

While many available mortgage options in the market, including credit unions, established banks, and external brokers, each brings a different level of credibility and assurance. Therefore, it is important to pick a lender that has a wide variety of options AND the knowledge and expertise to guide you to the loan product that best meets your needs. A lender with significant lending experience and knowledge that is consistently available to speak with you directly about the various options is critical.

Make Careful Comparisons

Finalized mortgage fees involve multiple factors that include:

  • Interest Rates – These refer to the interest accrued from a mortgage loan. Interest rates usually serve as the first point of consideration for buyers seeking to secure the best deal for their property investment. Mortgage lenders may also offer origination or discount points that buyers can apply to make their loans more manageable. Buyers can benefit from the tax-deductibility of mortgage points, similar to its interest rates.
  • Down Payments – The down payment for mortgages can significantly impact a buyer’s finances. Trusted lenders can help guide buyers toward the most suitable down payment arrangement based on their financial considerations. Lenders can present down payment assistance programs to mitigate long-term loan commitments if necessary.
  • Fee Breakdown – Mortgage fees involve multiple components. It is important to request that vendors break down their rates for transparency of the amount.

The sum usually includes underwriting and application fees settled upon closing the loan. Trusted mortgage lenders should provide the opportunity to guide buyers through each portion of the fees and provide room for negotiation where applicable.

Ask Essential Questions Before Choosing a Mortgage Lender

Due to the complex and often lengthy process of mortgages, buyers must ask a few key questions before proceeding with a lender’s offer. Some of these questions require self-research before approaching a mortgage provider.

The three primary questions below can help start the conversation with mortgage lenders during the first meeting.

What Are the Available Types of Mortgage Loans?

When choosing a mortgage lender, learning about their complete list of loan options is necessary. Mortgage options often include VA loans (applicable for active-duty personnel and veterans), conventional loans, and Federal Housing Administration (FHA) loans.

Conventional loans usually offer quicker mortgage approvals but have higher interest rates. Additionally, conventional loans often have strict requirements for spotless credit ratings. Most buyers need to present a credit score of 720 or higher to access the best conventional mortgage rates. Credit scores have become more crucial with the spike in mortgage rates.

Alternatively, government-backed FHA loans require lower credit scores for approval. However, since buyers can reduce the upfront fees for FHA, they may need to pay for mortgage insurance (applicable if the down payment amounts to less than 20% of the mortgage).

What Are the Loan Rates and Periods?

Lenders typically provide two types of mortgage rates: fixed rates and adjustable rate mortgages (ARMs) or floating mortgages. Fixed-rate mortgages support stable monthly payments throughout the loan’s lifetime, while ARMs present an initial low introductory rate while adjusting for market conditions in subsequent months.

Who Is My Main Contact During the Process?

Buyers should clearly understand the professionals assigned to their mortgage application, typically the Mortgage Loan Originator. A primary contact person, that is available 7 days a week via phone, email, text, or face-to-face, can help provide the specific details and progress throughout the mortgage process so buyers can make the necessary planning and financial arrangements. The primary contact can also clarify the online and in-person steps to offer a seamless lending experience.

Final Thoughts

First Western Trust offers personalized and strategic banking services, including a wide range of effective mortgage plans. This well-established bank is a reliable financial partner providing premium personal and private/commercial loan options and wealth-building strategies.

Every Mortgage Loan Officer offers the knowledge, experience, availability, and dedication to guiding buyers through the most comprehensive banking options, including the various types of home loans.

The Benefits of a Mortgage Recast

Posted on by First Western Trust Bank

Homeowners understand that their monthly mortgage payment is based on the initial down payment and the loan term. Many homeowners who acquired a mortgage with high-interest rates often seek to refinance when interest rates drop. Others attempt to pay off their mortgage quicker by paying more toward the principal each month. Both options are viable solutions for reducing the amount of the monthly payment. A third option is a mortgage recast, which is a particularly beneficial solution when interest rates are high.

What is a Mortgage Recast?

Put simply, a recast mortgage is a mortgage that has been recalculated to reduce the monthly premium. When recasting mortgages, a lender will calculate a homeowner’s new monthly payment based on the outstanding balance and the number of years remaining on the mortgage.

A mortgage recast should not be confused with a mortgage refinance. Refinancing a mortgage means creating a new loan with a new interest rate, a new term, or both. But refinancing isn’t always a possibility when interest rates remain high. Additionally, many lenders charge closing costs for a refinance.

With a recast mortgage, a new loan is not created, and the interest rate on the loan does not change. Instead, the monthly payment is recalculated, and the remaining loan term and any equity in the home also remain unaffected.

Benefits of a Mortgage Recast

The primary benefit of a recast mortgage is, of course, lower monthly mortgage premiums. But there are many additional benefits to recasting mortgages, including:

No Credit Check or Lengthy Paperwork Processing

When a homeowner refinances a mortgage, a lender will perform a credit check. Typically, additional paperwork is required that is almost on par with the paperwork necessary for a standard mortgage. And while many lenders have facilitated the process, it can still take time for everything to be fully processed. However, there is no credit check requirement with a mortgage recast, and the process can be completed much faster.

No Closing Costs

Another significant benefit of recasting a mortgage is no closing costs. There may still be a fee for a mortgage recast, but it is far less than the closing costs for a refinanced mortgage. Depending on the lender, the fee may be only a few hundred dollars. 

Less Money Paid Towards Interest

A mortgage recast means not only lower monthly payments but also less interest paid as well. Mortgage recasting reduces the actual interest paid over the life of the loan, which decreases the total amount of the loan overall.

The Loan Term Remains the Same

When refinancing a loan, it is common to increase the loan term. For example, a homeowner who has already paid a loan for five years on a 30-year loan and then decided to refinance will likely start over with a new 30-year loan term.

Things to Know Before Recasting a Mortgage

While the benefits of a recast mortgage certainly seem great, there are some things to be aware of before homeowners opt for this solution.

The Interest Rate Remains the Same

Homeowners seeking to take advantage of lower interest rates when they have a mortgage with high interest cannot do so with a mortgage recast. The interest rate remains the same. However, recasting a mortgage can be a great option if interest rates are still high or have risen even higher than the homeowner’s current rate. It might also be prudent to look at other non-traditional mortgage options designed to fit the needs of homeowners focused on wealth planning.

Cannot Access Home Equity

When a homeowner refinances, they often can refinance the loan for a larger amount — essentially tapping into their equity to receive extra cash. Refinancing the loan for a larger loan is not an option when recasting a mortgage. 

Not Available with All Lenders

Not all lenders offer a mortgage recast option. Additionally, not all types of loans are eligible, and there may be restrictions depending on the current state of the mortgage.

Final Thoughts

A mortgage recast might be a better option for some. One of the best ways to determine if recasting a mortgage is the smart thing to do is to figure out the ultimate purpose of your current loan. Are you simply seeking to lower your monthly payment? Or do you have plans to access some of your home equity? Do you want to use the savings from a mortgage recast to improve your future wealth planning potential, or do you wish to take advantage of a much lower interest rate?
Homeowners that want to know how to recast a mortgage and whether it is a good option for them can contact First Western Trust to learn more. First Western Trust specializes in providing customized mortgages and understands the unique financial situations of its clients. With several lending options and a highly experienced team of professionals, First Western Trust is ideally suited to help with a mortgage recast and other home lending needs.

Home Refinancing Strategies in High-Interest Rate Environments

Posted on by First Western Trust Bank

Interest rates remain high for fixed-rate loan mortgages. These market trends could lead to significant increases in monthly payments and debt-to-income ratios for future borrowers. During such times, homeowners looking to refinance a mortgage might benefit from seeking alternative options to traditional fixed-rate mortgages. Through collaboration with a seasoned financial institute, it is possible for homeowners to find lower rates while most of the market deals with a high-interest rate environment. 

However, some transitory refinancing solutions or mortgage products may lead to costly expenses in the long term. Therefore, homeowners must understand each available solution before signing on the dotted line. Buyers can tap into several mortgage refinancing alternatives to minimize the toll of high-interest rates. 

Apply for Adjustable-Rate Mortgages (ARMs)

ARMs are essentially mortgage arrangements that gradually deviate from a fixed interest rate in home loan refinancing. ARMs begin with a fixed interest rate and adjust across a six-month or annual period. While ARMs once had fixed-rate periods of less than three years, these have increased recently to provide improved financing stability.  

For example, a mortgage provider might offer a 7/1 ARM arrangement. Under this agreement, the borrower services a fixed rate for the first seven years and an adjusted final term. In a 3/3 ARM, homeowners service a fixed loan for the first three years and an adjustment for the remaining three years. 

Lending institutions can help guide homeowners through various ARM options based on their needs and priorities. While ARMS offer lower initial payments, it is essential to note that future adjustable interest rates can spike based on market and economic changes. 

Homeowners should check with their lenders regarding exact ARM practices, as some policies offer cutoff amounts that protect against significant interest increases. Also, it is important for borrowers to make the necessary financial plans for servicing higher-adjusted loans that may occur in ARM arrangements. 

Discuss Loan Assumption Options

Buyers who can afford higher cash down payments may consider taking over the remainder of a fixed mortgage term from current homeowners to avoid high-interest market rates. The process, known as loan assumption, allows buyers to take over a property owner’s original term conditions in home loan refinancing. 

However, loan assumptions usually involve substantial paperwork to address various changes that originate from the start of the loan. A trusted lender can help sort through the details, such as accounting for the difference between sales pricing and outstanding loan balances. 

Leverage Home Equity Line of Credit (HELOC) 

A HELOC is an effective method of refinancing home payments during high-interest periods. The revolving loan type allows borrowers to secure a loan against up to 85%–90% of their home equity. According to the Consumer Financial Protection Bureau (CFPB), nearly a million consumers borrowed against home equity in Q2 2022. 

A HELOC offers an adjustable interest rate, where borrowers can tap into the funds via a line of credit for an agreed draw period. HELOC draw periods usually span 5–10 years and depend on financial assessments conducted by the lender, which may include a homeowner’s creditworthiness and the home equity value of a property. 

The HELOC process lets homeowners leverage their equity without replacing current low-interest mortgages with higher-interest cash-out refinances. While HELOCs can help homeowners leverage their equity in high-interest environments, these lines of credit carry some risks. 

It is important to discuss other potential risks and fine print associated with the loan type with a trusted lender before proceeding with the arrangement. For example, since HELOC relies on home equity, borrowers face the danger of foreclosure if they fail to repay the loan based on agreed-upon terms. Also, buyers may feel tempted to borrow additional funds from their HELOC for personal spending, resulting in debts and financial challenges down the road. 

Consider Temporary Interest Rate Buy-Downs

Financial institutions may recommend a temporary buy-down for home loan refinancing in high-interest environments. A temporary buy-down usually involves an additional initial payment in exchange for lower interest rates down the mortgage life cycle. Lenders may extend the discounted interest rate for a few years before reverting to the original values. 

For example, a borrower might request a buy-down at 3.5% for the first two years of a 15-year mortgage loan with a 5% interest. When opting for a buy-down, it is essential to consider factors like the total upfront cost and buy-down period to determine the best long-term outcome. 

Broaden Refinancing Options

Owners may go beyond mortgage refinance options in home loan refinancing by exploring different sales transactions. For example, individuals may consider contract-for-deed arrangements and private mortgages, where sellers and buyers negotiate the interest rates and related terms between each other for a property transaction. These privately settled arrangements may also include late payment provisions and penalty arrangements. 

Engaging in these unconventional financing options requires close attention to the legal agreements to avoid balloon payments and other factors that could result in high-interest rates in the long run. 

Final Thoughts

First Western Trust offers mortgage services for optimized outcomes across different settings, including high interest rate environments. The experienced team applies years of expertise to personalize banking services and diversify investment portfolios for enhanced wealth planning and strategic methods to refinance home loans. Those who partner with us have access to maintaining a loan within our portfolio loan program. Being a part of our program allows us to underwrite cash flow and be more creative than most brokers which can make a significant difference in helping you obtain the right loan to meet your needs.
Reach out to First Western Trust’s mortgage team to discover the most suitable strategies to refinance your home today.

How First Western Trust Can Help You Find the Right Home Loan

Posted on by First Western Trust Bank

Even in the best of circumstances, finding the right mortgage loan can be an extremely complicated and daunting process. Fortunately, at First Western Trust, we’re here to help. With decades of experience with high-net-worth individuals and a genuine understanding of a family’s financial needs in a constantly changing market. 

Experience With High-Net-Worth Individuals

At First Western Trust, we’re proud to offer a vast array of mortgages for all clients. We have years of experience and have successfully completed mortgages in all fifty states, giving us some of the broadest perspectives on the market today. No matter our client’s financial situation, we’re here to help ensure they get the mortgage product they need, and we guarantee that we offer superior service to every one of our clients.

However, we also understand that high-net-worth individuals have specific requirements and need concierge-level services for managing their portfolios. This high level of needs demands that high-net-worth families partner with a bank that knows how purchasing a home will impact their portfolio. 

For example, a high-net-worth individual may need a jumbo loan to finance their property since it is valued too high for a conventional conforming loan. At the same time, a family may buy a larger home for a growing family. They may also buy a vacation home to spend a summer at or be looking to downsize towards retirement.

For any reason, a person obtains such a mortgage, mortgages for high-net-worth individuals are always more complex than mortgages than average home loans. A high-net-worth family may need to consider various implications of their loans, including how such a mortgage will impact their overall banking services or when it may be appropriate to begin working with a private bank to handle their financial needs.

Types of Loans Offered

Our mortgage consulting team works closely with high-net-worth clients to ensure we find the right solution for their needs. Furthermore, we work closely with our clients at all steps of the mortgage planning process, ensuring they are comfortable with the various financial solutions provided. 

At First Western Trust, we offer many loan types and services. We offer jumbo loans, conventional loans, loans for second homes, portfolio loans, investment property loans, and deed-restricted loans.

This vast array of loan types can be overwhelming, and even the most financially astute of clients may need assistance differentiating the best product for their needs. Not knowing how to identify the right loan is entirely understandable, as mortgages for high-net-worth individuals may have various financial implications, including:

  • How a mortgage will impact tax planning
  • The need to fold in a mortgage with overall estate planning
  • The need to balance repayment of a mortgage loan with investing in the stock market, businesses, and repayment of other debt

High-net-worth individuals need to work with a bank like First Western Trust. At First Western Trust, we have experience working with clients with extremely specific and complex needs. We understand the intricacies and implications these products can have on a portfolio. By working with our clients, we can help them identify which loan best suits their needs and ensure they get a more valuable product than one found at any other national chain of banks. 

More to the point, we also know that our clients demand the highest level of service and as much time as possible to consider a loan’s implications on a portfolio. That’s why we ensure that we provide our clients with as much detail as possible. We always give all closing figures at least 72 hours in advance. Doing so enables our high-net-worth clients to be as prepared as possible for closing. 

Final Thoughts

Jumbo loans, mortgages for second homes, investment property loans and more are major loans that can have a massive impact on the financial future of high-net-worth individuals and their ability to plan their finances for years to come. That’s why a bank with no experience in this area can’t just handle mortgages for high-net-worth individuals.
First Western Trust has years of experience working with high-net-worth mortgage lenders and ensuring that any home loan ultimately fits with the financial future of these individuals. We’re here to fulfill our customers’ mortgage needs and help them get whatever mortgage loan will fulfill their financial planning requirements. Contact a Mortgage Loan Officer today for more information on how we can help you get the mortgage loan that fits your financial future.