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What is a comfort letter, and why might you need to submit one?

The mortgage process when purchasing a home can be tricky. There’s a ton of paperwork to read through and sign”so much that your hand might cramp up from the vast amounts of signatures required. But don’t worry if your mortgage lender requests that you write a “comfort” letter”it’s just a statement clarifying your financials so the lender can get you to the closing table with minimized risk.

As to what the mortgage lender might want to clarify, it could be a number of things:

Employment Lapses
Is there a period of time in which you werent working recently? The lender may ask you about this lapse to ensure youre still a stable loan candidate and financially comfortable with paying back the loan once you close on the home. You may have worked freelance during this time, in which case the lender may ask for proof of income.

Large Bank Deposits
Did you recently come into a large sum of money? If you deposited it into your bank account, your mortgage lender may ask you where that money came from and what you plan to use it for. There are strict rules about using gifted funds toward the purchase of a home, and your lender will want to confirm it’s not a loan given to you by friends or family that you’ll need to pay back.

New Job Status
Are you switching jobs in the middle of the loan application? If there’s a change in income, this could add another layer of questioning. Your lender may want you to state how much youll be making at the new job, as anything less than your current income is going to change how much you can afford. The lender may also want to know where the job is located”if it’s further away from where you live, will you be commuting or working remotely? The lender just wants to ensure youre a legitimately viable loan candidate.

A comfort letter is a way for your mortgage lender to cover its bases. If youre completely open about your financial history when applying for the loan, you have nothing to worry about. So, don’t panic. Just provide the requested information in a timely fashion, and you should be good to go.

Published with permission from RISMedia.

If you’ve owned a home for several years and made responsible financial decisions, you may have built a significant amount of equity. Home equity is the difference between the current market value of your house and the amount you still owe on the mortgage. If the value is greater than the debt, you have positive equity that can be used to finance other goals.

How Does Equity Change Over Time?
There are two ways to increase the amount of equity in your home. First, you can pay down the principal on the mortgage and make improvements that will increase the value of the house. As the ratio of the amount of the house you own outright to the amount of debt increases, equity grows.

It takes years to build equity. One reason for this is that mortgages tend to charge more interest at the beginning of the repayment period, which means a relatively small amount of each payment is applied to the principal. Later in the repayment period, a higher percentage of each monthly payment will pay off the principal, so equity will grow at a faster rate.

Paying a mortgage each month can be a way to force yourself to save and build wealth. Since the value of a house will increase over time in most circumstances, you can amass a significant amount of equity if you stay in your house for several years.

Paying your mortgage on time is no guarantee that you will gain equity. If the local housing market or the economy as a whole takes a nosedive, the value of your house could plummet. You could wind up with less equity than you had before, or you might even wind up owing more than your house is worth.

How to Take Advantage of Equity
You can benefit from your homes equity when you sell it. If you receive more than the amount of the outstanding mortgage balance, you will be able to pay off the loan and walk away with a profit.

You can also use your home equity while you are living in your house. You can borrow against your equity with a home equity loan, which would provide a lump sum of money, or a home equity line of credit, which would let you borrow money in a variety of amounts over a period of time, up to your credit limit. Both options would provide you with money that could be used for home repairs and improvements, credit card bills, and other expenses.

If you want to find out how much equity you currently have, you can use a home equity calculator to get an estimate. If you want a more exact figure, you will need to have the house appraised.

Focus on Increasing Equity
Home equity takes time to build, but it can give you the financial flexibility you need to pursue other goals. Diligently paying down your mortgage and making valuable home improvements can help you grow your equity faster.

Published with permission from RISMedia.

If you plan on buying a house and need a mortgage, a lender is going to perform a credit check to help determine whether to give you a loan and the interest rate youd have to pay. The higher your credit score, the more likely youll get approved and the lower your interest rate might be.

Shopping around for the best deal can save you thousands of dollars over the life of a mortgage, but its also important to understand how credit checks work and might affect you. According to the Consumer Financial Protection Bureau, here are some main factors to keep in mind:

Inquiries
A credit check is reported to the credit reporting agencies as an “inquiry.” Inquiries tell other creditors that youre thinking of taking on new debt. An inquiry typically has a small, but negative, impact on your credit score that could affect your chances of getting other types of loans. Inquiries are a necessary part of applying for a mortgage, so you can’t avoid them altogether. But it pays to be smart about them.

As a general rule, apply for credit only when you need it. Applying for a credit card, car loan or other type of loan also results in an inquiry that can lower your credit score, so try to avoid applying for these other types of credit right before getting a mortgage or during the mortgage process.

Personal Credit Checks
Because your credit plays a major role in mortgage eligibility and rates, you should make sure your credit is in good standing and the information correct before applying for a loan. Fortunately, doing a credit check on your own does not affect your credit score. You can get a free copy of your credit report at www.annualcreditreport.com. If you find any errors, get them corrected immediately to avoid potential impacts.

Shopping Around
Within a 45-day window, multiple credit checks from mortgage lenders are recorded on your credit report as a single inquiry. This is because other creditors realize youre only going to buy one home. You can shop around and get multiple pre-approvals and official loan estimates. The impact on your credit is the same no matter how many lenders you consult, as long as the last credit check is within 45 days of the first credit check. (Note: The 45-day rule applies only to credit checks from mortgage lenders or brokers”credit card and other inquiries are processed separately.)

Even if a lender needs to check your credit after the 45-day window is over, shopping around is usually still worth it. The impact of an additional inquiry is small, while searching for the best deal can save you a lot of money in the long run.

This article is intended for informational purposes only and should not be construed as professional or legal advice.

Published with permission from RISMedia.

Eye-catching yards can increase a homes curb appeal and boost its value, but gardening and lawn care account for a large chunk of household water consumption. The good news is that, whether you are environmentally conscious or just want to lower your water bill, you dont need to use a lot of water to have a beautiful landscape. If youre designing a new yard or sprucing up your current one, consider using water-smart landscaping techniques.

Go native or choose plants that need less water. Once established, native and low-water-using plants require little water beyond normal rainfall. Also, because native plants are adapted to local soils and climatic conditions, they rarely require the addition of fertilizer and are more resistant to pests and diseases than other species. Be careful when selecting exotic species, as some may be invasive, which may require more water and could displace native plants.

Recognize site conditions and plant appropriately. Areas of the same site may vary significantly in soil type or exposure to sun and wind. Placing plants that prefer shade in open sun will affect their ability to thrive. Be mindful of a site’s exposure to the elements and choose plants that will thrive in the site’s conditions.

Group plants according to their water needs. Grouping vegetation with similar watering needs into specific “hydrozones” reduces water use and protects the plants from both underwatering and overwatering by allowing you to water to each zone’s specific needs. For example, turf areas and shrub areas should always be separated into different hydrozones because of their differing water needs.

Maintain healthy soils. Healthy soils are the basis for a water-smart landscape; they effectively cycle nutrients, minimize runoff, retain water and absorb excess nutrients, sediments and pollutants.

Place turfgrass strategically. In traditional landscapes, turfgrass receives the highest percentage of irrigation water. To better manage outdoor water use, consider planting turfgrass only where it has a practical function, such as a play area.

Use mulch. Incorporate mulch around shrubs and garden plants to help reduce evaporation, inhibit weed growth, moderate soil temperature and prevent erosion. Adding organic matter and aerating soil can improve its ability to hold water. You should also replace mulch at least once per year.

In short, plan and maintain your landscape with water efficiency in mind, and it will continue to be attractive and healthy while requiring less maintenance and water.

Source: U.S. Environmental Protection Agency

Published with permission from RISMedia.

Looking to revamp your home before bringing it on the market? A fresh coat of paint can make all the difference. Do away with those dated walls and cover up the scuff marks that show general wear and tear. If youre looking for some inspiration, here are five of todays trendiest paint colors.

Living Coral

As Pantones 2019 Color of the Year, living coral is a vibrant peach shade that will add a burst of color to any wall in your home. Whether youre looking to brighten up a dark space or create a visually interesting accent wall, this blend of orange and pink is utterly uplifting.

Hunter Green

Bold yet earthy, youll find hunter green on Benjamin Moores 2019 Color Trends Palette. This rich tone complements classic colors, making it a safe bet to stay in style well after the year ends. If youre the type who likes to play things safe, rest assured that hunter green can be accented with more neutral tones.

Moody Blue

Mood shades of blue are all the rage right now. From kitchens to dining rooms, this dark and sultry hue makes a serious statement that interior designers cant get enough of these days. It works best in a room that gets plenty of natural light and pairs well with metallic fixtures.

Soft Pastels

You can never go wrong with gentle pastels to set the tone. Sky blues and sea greens create a soft color palette that serves as the base when decorating the rest of the room. If you find bold color schemes to be too overwhelming, this could be the choice for you.

Cavern Clay

A relaxed version of living coral, cavern clay is a soothing tone that works equally well in the living room, bedroom, or powder room. Reminiscent of terracotta, it has a down-to-earth feel that can transform a room.

Published with permission from RISMedia.