30
Jan
By Mike Pfefferman
Home Financing Tips

Tips to Remember When Shopping for a New Home Loan

Finding a new home loan can seem challenging, but if you take the proper steps before you start applying for loans, you’ll have no difficulty finding a mortgage that works for you and a lender that would love to have you as a borrower. Shopping for a mortgage isn’t like shopping for a couch, and there’s a lot that goes into the process.

So how can you shop for your new home loan in a way that saves you time and gets you the best loan for your needs? Here’s what you need to know.

Research Loan Types
A lot of home buyers, especially first-time buyers make the mistake of not doing their research and not asking enough questions. A fixed-rate mortgage isn’t right for every homebuyer. Neither is an adjustable-rate mortgage. If you plan to stay, put in a home to raise a family, you might consider a 30-year loan.

Conversely, if you’re moving in 10 years or less, an adjustable-rate mortgage, or ARM, could better suit you. It’s advised that you research loan types then prepare a list of questions to ask your mortgage agent to ensure you select the loan that’s best for you.

Get Pre-Qualified Before You Start Looking
It can be tempting to start looking for mortgages online and start seeing what kinds of rates and limits you can afford, but if you start your mortgage hunt with Internet window-shopping, you may end up sorely disappointed. A pre-qualification is a vital first step that can help you to find the mortgage that works best for you. With a pre-qualification, you’ll have a good idea of what you can reasonably afford to spend on a home, so you won’t waste time viewing homes that are outside of your price range.

Hold Off On Major Life Changes Until You Have Your Mortgage
Once you’ve been pre-qualified and pre-approved, the next step is the approval process, the part of the process where the lender you’ve chosen evaluates your application and decides whether or not to lend to you. One mistake that a lot of homebuyers make is allowing significant changes in their income to happen during the approval process. If you quit your job to start a business, or if you go down to part-time hours so you can spend more time with the kids, your lender will need to start the approval process again with your new financial information in mind, so hold off on any big changes until you’ve been approved.

Finding a new home loan can seem like a challenge, but a qualified mortgage advisor can help. Contact your local mortgage professional to learn more.

11
Sep
By Mike Pfefferman
Mortgage

5 Key Steps in the Mortgage Underwriting Process

Buying a home can be exciting, but it can also feel overwhelming. Understanding the mortgage underwriting process can make things a lot smoother! 

What is Underwriting?
Underwriting is when lenders review your financial information to determine if you qualify for a mortgage. They check your income, assets, credit history, and the property itself to assess risk.

The 5 Key Steps

  1. Submit Your Application
    Pre-approval starts here! This tells you and your lender how much you can afford and saves time while looking for a home.
  2. Verify Income and Assets
    Provide documents like pay stubs, tax returns, bank statements, and ID. Lenders check your debt-to-income ratio and credit history to make sure you can handle the mortgage.
  3. Property Appraisal
    A professional appraisal ensures the homeís value matches the price. Condition, features, and comparable sales are all considered.
  4. Title Search and Insurance
    A title company verifies that the home is free of legal issues and provides insurance to protect both you and the lender.
  5. Underwriter’s Decision
    Decisions can be:
    • Approved – You’re ready to close!
    • Suspended – More info or documents are needed.
    • Denied – Additional steps are required to improve your eligibility.

After Underwriting
Once approved, youíre on track for closing! The process can take a few days to a few weeks, depending on your file and the property.

Understanding underwriting helps reduce surprises and makes your homebuying experience smoother. Knowledge is power when it comes to your biggest investment! 

15
Aug
By Mike Pfefferman
Mortgage Tips

The Pros and Cons of Mortgage Assumptions

When purchasing a home, buyers typically assume a new mortgage loan. However, in some situations, a buyer may opt to assume the seller’s existing mortgage. Known as a mortgage assumption, this process allows the buyer to take over the terms and payments of the seller’s current loan. While mortgage assumptions can offer benefits, they also come with certain drawbacks. Understanding the pros and cons of mortgage assumptions can help you determine whether this option is right for you.

What is a Mortgage Assumption?
A mortgage assumption occurs when a buyer takes over the seller’s existing mortgage, including the remaining balance, interest rate, and loan terms. The buyer essentially steps into the seller’s shoes and assumes responsibility for the loan payments. Not all mortgages are assumable, as many conventional loans include a due-on-sale clause, which requires the full loan balance to be paid upon transfer. However, certain types of loans, such as FHA and VA loans, are often assumable, provided the lender approves the buyer.

Pros of Mortgage Assumptions

  1. Lower Interest Rate
    One of the main advantages of assuming a mortgage is the potential for securing a lower interest rate. If the seller’s mortgage has a lower rate than current market rates, the buyer can benefit from continuing to pay that rate. This can result in significant savings over the life of the loan, especially if the mortgage is relatively large.
  2. Lower Closing Costs
    Mortgage assumptions generally involve lower closing costs compared to obtaining a new loan. Since the buyer is assuming the existing mortgage, there may be less paperwork, fewer fees, and no need for a new appraisal or origination fees. This can make the overall cost of purchasing the home more affordable for the buyer.
  3. Faster Process
    Assuming a mortgage can be a faster process than securing a new loan. Since the terms of the loan are already established, the buyer does not have to go through the time-consuming approval process required for a new mortgage. This can be beneficial for buyers who need to move quickly.
  4. Avoiding Tight Lending Conditions
    In some cases, assuming a mortgage may allow a buyer to avoid strict lending requirements. If the buyer has difficulty qualifying for a traditional loan due to credit issues or income concerns, assuming a mortgage with more lenient requirements may be an attractive option.

Cons of Mortgage Assumptions

  1. Limited Availability
    Not all mortgages are assumable. Conventional loans, which are the most common type of mortgage, typically include a due-on-sale clause, making them non-assumable. Therefore, the buyer will need to look for FHA, VA, or other specific loan types that allow assumptions. This can limit the pool of homes available for purchase via a mortgage assumption.
  2. Seller’s Mortgage Terms May Not Be Ideal
    While assuming a mortgage can allow for a lower interest rate, the terms of the seller’s mortgage may not always be favorable. For example, the remaining balance could be large, or the repayment period may be much shorter than the buyer desires. Additionally, some older mortgages may not offer flexibility in terms of prepayment or refinancing.
  3. Lender Approval Required
    Even if the loan is assumable, the lender must approve the assumption. The buyer will need to meet the lender’s financial qualifications, similar to the approval process for a new loan. This can make the assumption process time-consuming and complicated, as the lender will need to review the buyer s financial situation before agreeing to the assumption.
  4. Remaining Seller Liabilities
    If the buyer assumes the mortgage, the seller may still be liable for any deficiencies or issues related to the loan. This is particularly important if the mortgage is not fully paid off by the end of the assumption process. In some cases, the seller may need to sign documents that protect the buyer from any future liabilities or claims, which can complicate the transaction.

Mortgage assumptions can offer significant advantages, such as lower interest rates and reduced closing costs, making them an appealing option for buyers in certain circumstances. However, the limited availability of assumable mortgages and the potential for less favorable terms should be carefully considered. Buyers should evaluate whether assuming a mortgage aligns with their financial goals and work closely with a lender to ensure the process runs smoothly.