09
Oct
By Mike Pfefferman
Mortgage Tips

Why Buying a Home From a Family Member Can Make the Mortgage More Complicated

Buying a home from a parent, grandparent, sibling, or another relative may seem easier than purchasing from a stranger. You already know the seller, may know the property’s history, and might even agree on a price without extensive negotiations.

But the family relationship can introduce mortgage considerations that are different from those in a typical purchase between unrelated parties.

The Relationship Matters
A transaction between people with an existing relationship may be considered differently from a traditional arm’s-length sale.

That does not mean family transactions are prohibited. It means the lender may need to understand the relationship between the buyer and seller and review the structure of the transaction accordingly.

Being clear about the relationship from the beginning is important.

A Gift of Equity May Be Possible
One feature sometimes associated with family transactions is a gift of equity.

Instead of giving the buyer cash for a down payment, an eligible family member selling the property may be able to provide a portion of the home’s equity as a gift within applicable mortgage guidelines.

How a gift of equity can be used depends on the mortgage program and transaction, and documentation requirements can apply.

Buyers should discuss the proposed structure before agreeing on final numbers.

The Appraisal Still Matters
A family member may be willing to sell a property for less than they believe it is worth, but the agreed price does not eliminate the appraisal process when an appraisal is required.

The property still needs to be evaluated independently for the mortgage transaction.

That can become particularly important when a gift of equity or below-market sale is involved.

Treat It Like a Financial Transaction
Family relationships can make buyers and sellers more comfortable relying on verbal agreements.

A home purchase is too significant for assumptions.

Make sure the purchase price, credits, responsibilities, timelines, and other terms are properly documented through the appropriate transaction paperwork.

Buying a relative’s home can create an opportunity that would never reach the open market. It can also allow a property with family history to remain within the family.

The key is to remember that familiarity between buyer and seller does not eliminate the mortgage process.

Discuss the family relationship, proposed purchase price, and any planned gift of equity with your mortgage and real estate professionals early so the transaction can be structured correctly from the beginning.

08
Oct
By Mike Pfefferman
Mortgage Tips

What Happens to Your Mortgage When the Home Has an Unfinished Addition?

You find a home you love, but there is one unusual feature. Maybe the previous owner started adding a bedroom and never finished it. Perhaps a bathroom is partially remodeled, a garage conversion is incomplete, or a new section of the house is still visibly under construction.

Buyers may see opportunity in unfinished space, but a mortgage lender may need to evaluate the property as it exists today.

Financing Is Based on the Current Property
It is easy to walk through an unfinished addition and imagine what it could become.

The mortgage transaction, however, generally has to consider the property’s current condition rather than simply the buyer’s plans for completing it later.

The appraiser may need to identify unfinished areas and determine how they affect the property being valued.

Not All Unfinished Projects Are Equal
Missing cosmetic finishes are different from major incomplete construction.

A room awaiting paint or updated flooring presents a different situation than an addition with exposed framing, unfinished electrical work, missing plumbing fixtures, or other incomplete components.

The extent and type of unfinished work can influence what questions need to be answered.

Permits Can Become Part of the Conversation
An addition also raises another important question: Was the work properly permitted when required?

Buyers should understand what was added, who performed the work, and what information is available through the seller or applicable local records.

An attractive partially completed space should not automatically be assumed to be recognized living area.

Do Not Assume You Can Finish It After Closing
Buyers sometimes approach an unfinished project with a simple plan: purchase the property now and complete everything later.

That may ultimately be possible, but it should not be assumed before the financing has been reviewed.

Depending on the property condition and mortgage program, incomplete work could require additional evaluation or affect available financing options.

If you are seriously considering a home with an unfinished addition, show the details to your mortgage professional as early as possible. Photos, listing information, disclosures, and information about the work can help start the conversation.

A half-finished room may look like an opportunity to create exactly what you want.

Just remember that before you can finish the project as the homeowner, you first have to successfully purchase the property in its present condition.

02
Oct
By Mike Pfefferman
Home Buyer Tips

What Happens When Your Closing Date Gets Pushed Back?

You scheduled the movers, arranged time off work, started packing, and expected to receive the keys on Friday. Then you learn that closing needs to be delayed. Even a short change in the closing date can affect more than moving day, which is why buyers should understand what may need attention when the timeline changes.

The Mortgage Timeline May Need Attention
A mortgage transaction contains several items tied to specific time periods.

Depending on the circumstances, a closing delay could affect documents, verifications, or other time-sensitive portions of the loan process.

One important example is an interest rate lock. Rate locks generally apply for a defined period. If closing moves beyond that period, buyers should find out whether an extension is necessary and whether any cost or other conditions are associated with it.

Your Cash-to-Close Numbers Can Change
Changing the closing date can sometimes change certain amounts shown in the transaction.

Prepaid interest is one example because the amount can depend partly on the date the loan closes. Other prorated items associated with the transaction may also need to be recalculated.

That means buyers should review updated closing information rather than assuming every number will remain exactly the same.

The Moving Plan May Need to Move Too
The financial side is only part of the inconvenience.

Movers, utility transfers, deliveries, time off work, temporary lodging, and the end of a lease may all have been scheduled around the original closing date.

Whenever possible, avoid creating a schedule that leaves absolutely no flexibility between closing and another major deadline. A small cushion can be extremely valuable if the transaction shifts by a day or two.

Do Not Assume You Have the House Until Closing Is Complete
Buyers can understandably become excited once the closing date is placed on the calendar, but it is important to remember that the transaction still has steps to complete. Avoid making irreversible plans based solely on an anticipated closing date.

If a delay occurs, ask what caused it, what remains outstanding, and whether anything is needed from you. Also confirm whether the change affects your mortgage, funds required, rate lock, insurance, or other arrangements.

Most buyers hope for a perfectly predictable closing. Real estate transactions, however, involve multiple parties and moving pieces. Planning for a little flexibility can make an unexpected delay far less disruptive and help keep the focus where it belongs: successfully completing the purchase and getting the keys.