Mortgage Pre-Approvals and Buying a Home

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Finding the right home to buy is not easy as it may seem. Most prospective home buyers get frustrated when they are asked for the pre-approval letter. Mortgage pre-approval is one of the home buying processes that let the buyers determine if you are a serious buyer. In fact, this is the most crucial step that will help you get a mortgage loan for buying a home. During the mortgage pre-approval process you will be required to submit documents such as bank statements, tax returns, and employment verification. Moreover, your credit report is very vital in this process.

Once you get mortgage pre-approval from the lender, you will be more trustworthy in the eyes of the sellers or a real estate agents. Also, you can show this letter to the sellers when bidding for a property. It demonstrates your ability to purchase the property and makes you more attractive to the sellers.

Importance of mortgage pre-approvals in the home buying process

#1. Shows your capability to buy a home

Unless you are planning to purchase a house for cash, you have to arrange for some financing. It can be very frustrated to search for a home for several days only to find that you cannot afford it. However, with the mortgage pre-approval letter, the realtors and sellers will have more confidence in you.

#2. Refine your search

The mortgage pre-approval letter will help you know how much you can spend. In fact, this will save you time from searching for homes that you cannot afford. It can be very hurting to find your dream house only to be denied because you cannot afford it. In this case, the mortgage pre-approval will help the realtors find a home that is within your price range.

#3. Allow easier negotiations with the seller

In most cases, sellers are more willing to negotiate with buyers who are pre-approved that those who don’t have a pre-approval letter. Moreover, the seller will give you preference for the offers that might be in the house.

#4. Better results from the Realtors

Usually, realtors will prefer to work with buyers who have a pre-approval letter. In this case, the realtor will know the deal is less likely to collapse. Moreover, the realtor can easily find your dream house because they know what you can afford.

Conclusion

Finding your dream home can be challenging if you have the right mortgage financing. However, mortgage pre-approval letter will make the sellers have trust in you. Moreover, the realtors will be more willing to work with you.

Home Appraisals: What They Are and Why They’re Important

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A home appraisal is basically an in-depth report on a house, created by an expert, known as the appraiser. This appraisal’s primary function is to determine the fair market value of the house being assessed. This market value is reached by taking into consideration several important factors about the property including:

  1. The floor area or size of the living space.
  2. The market value of comparable nearby homes.
  3. The features and facilities of the neighborhood.
  4. The year of construction of the property.

An appraisal is generally performed for the execution of most home loans, and also sometimes for home refinancing transactions and almost done in case somebody is planning to purchase the house. In the real estate world, after the buyer and the seller have settled on a purchase price, the lender involved will have the appraisal done by an independent third party, the appraiser. The buyer is the one required to bear the cost of the appraisal. This cost can range from $200 up to $500.

Also, appraisals can be reviewed. Appraisers may sometimes make mistakes and an appraisal may differ significantly from expectations. In this case, a review of the appraisal may be done. It rarely happens that the appraised value exactly matches the price on offer. An appraisal usually has two different outcomes, each with a significantly different impact on the transaction.

Let us assume that the buyer and seller have mutually agreed on a purchase price of $120,000, but the value of the property according to the appraisal, comes out as say, $125,000. This is actually good news for the home buyer. Assuming that all other factors fall into place, one can then proceed to disburse the loan as planned with the added benefit of $5,000 in spontaneous, built-in equity already in the property.

However, if the negotiated price is $120,000 and the appraisal comes out with a property value lower than this amount, for instance, $110,000, then it can create a significant delay in this deal. This can result in a lot of inconvenience for both parties, the buyer as well as the seller. The buyer has in this case, offered to pay a higher amount than the home is technically worth, according to the appraiser. Due to this, the lender cannot give the buyer a loan of more than what the home’s worth is. The only possible solutions are to either increase the down payment to reduce the total loan amount or to try and negotiate a lower price with the seller. Apart from this, the home appraisal can be reviewed to modify the appraisal amount.

Reverse Mortgage Scams: What They Are and How to Avoid Them

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A reverse mortgage scam occurs when perpetrators blatantly mislead a senior to take out a lump sum payment on a home’s equity to pay for a bunch of fictional items, costly repairs they don’t need, reverse mortgage counseling fees, attractive insurance policies and investments and feeder fee annuities from their fraudulent company and later these fraudsters disappear with the money and the senior is left with no cash or equity in their home. This results to various challenges such as eviction and poverty due to unpaid loan recovery and much more.

The two most common reverse mortgage scams are the equity theft and foreclosure rescue. In an equity scam , the fraudster purchases a house that is in a foreclosure or distressed/abandoned, sells it to a senior citizen who takes out a reverse mortgage after occupying the property for sixty days and once the transaction goes through perpetrator disappears with the proceeds. In the foreclosure rescue scam, the perpetrator identifies seniors who are at a risk of losing their homes due to foreclosure, convince them to obtain a reverse mortgage to save the property but will then inform the senior that he /she does not qualify. They encourage him to take a traditional mortgage at which point the property and its equity will be transferred to the fraudster.

 

However it is possible for a person to be able to avoid being a victim of reverse mortgage scams and misfortunes. This is possible through a number of ways listed below .these are:

 

  1. Every person should not wait until they are desperate for a mortgage that means you should avoid making financial decisions under stress as this limits the options that you would have to choose from.
  2. Always compare the offers in the market to be on the safer side and check the reputation of those offering them with the Better business bureau.
  3. Avoid those lenders who offer both a mortgage and investments too but rather choose a financial planner, financial officer or an asset manager for investments and in every uncertain investment apply the rule of thumb.
  4. Always consult more than one lender to clarify if a repair suggested by any one lender really exist or it’s just a fraud.
  5. Always consult a third party before signing papers offered to you if you do not know why you are signing them.
  6. Attend the closing of any deal in person to avoid any unknown changes to you on the terms and conditions.
  7. Always be suspicious of anyone telling you that you can own a house without a down payment.
  8. Do not accept payment from individuals for home you did not purchase.
  9. Do not respond to unsolicited advertisements.

 

In case it has happened or happens to you it’s always good to come out and report to the authorities who may help you recover the personal loses and you may be in a position to save other seniors from suffering the same fate and help them avoid reverse mortgage scams.

 

6 Signs it is Time for a Mortgage Refinance

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Dealing with a mortgage is always tricky when financing it. However, when you understand the indicators, you can always restructure it to fit your needs. Here is a guide on the signs that will tell you when to refinance it if you are looking for the best deals in the financial market:

  1. When you are planning to buy another investment property

Buying a new investment property can sometimes help you grow your money value in the long run. However, this might be challenging when you have no idea on what to do during the time as you do pay the mortgage of your home. You may seek refinancing to aid you solve your problems.

  1. When you are having huge debts

When you are at a point of defaulting on your personal debt, it is advisable to seek refinancing to assist you consolidate your debts as a way of easing your finances.

  1. When there exists better rates within the market

The market rates often change with time. You must know the existing market rates when you need excellent deals. You can always refinance your loan when you find better rates within the market. With better rates, you will be certain of making some savings in terms of amount of money that you will repay as interests. Those who have tried it have been satisfied with the better market rates thus helping them save money whenever they are looking for excellent deals.

  1. When you want to renovate your home

Think it is time to replace leaky faucets, repaint your home, or make major changes. This means you will need a strong refinancing procedure that may be a burden to your life. When you are in such a situation, you can take an opportunity to understand when to refinance to get out of it faster.

  1. When rates in the market are about to rise higher

Though interest rates may be recording lows, you should always know that they would always fluctuate depending on the dynamics of the market. As a borrower, you can always anticipate a rise in interest rate through switching your loan to a fixed rate if your currently do have a variable rate. Through this, you will enjoy lower interest rate for a much longer at the same time enabling you make some savings depending on the amount of money that you would spend.

  1. When there are changes in your financial situations

Having a rough time when repaying your mortgage can be difficult when you do not know what to do. However, through this process, you can always know what to do in your financial situation such as birth of a child or unemployment before seeking refinancing to switch to that loan you can easily afford.

 

What to Do After Your Mortgage Application Has Been Denied

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When you make a mortgage application and it is denied, you should know the procedure to follow when you want to fix it. However, this is always a simple process that you can do yourself. Here is a guide on what to do if mortgage declined:

  1. Read the rejection reason

When a financial institution rejects your mortgage application, they often give reasons why they think you are not suitable for the given mortgage. You should ensure that you read the reasons why your application has rejected to enable you learn on what you need to fix before they can adjust it for approval. In addition, when you lack ability to comprehend on what might be the problem, you can get help from financial experts who will guide you on the reasons for rejection thus helping you make corrections for approval.

  1. Fix the Problem

Once you know the set of problems that you need to fix before getting a mortgage loan, you should go ahead and do it. By contacting your creditors, you will explain to you the conditions to meet such as having a poor credit history as well as things that you must fulfill if you were to get your loan to be approved. In addition, they will suggest a set of financial changes you have to make in your mortgage application before it is approved.

After you have fulfilled the given conditions, you can reapply again from the financial institution to see whether they will approve your loan. If you do them right, you will always be certain that you will get the mortgage loan that you will need.

  1. Apply with Other Lenders

Just because one financial institution or lender refuse your loan request doesn’t mean that the next lender will. How do you do this? You can go ahead by checking with other lenders within your area. From your research, you will always have online companies or institutions who are ready to give you loans from the available credit history. However, you must do your research well in the market before deciding on what will actually work for you especially when looking for mortgage loans from the financial market. In the end, you will get a financial institution or lender who will be ready to approve your mortgage.

In conclusion, the above is a guide on what to do if mortgage declined if you need to get the best rates when looking for the mortgage loans.

Your Mortgage Payments: Are They About to Increase?

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Finding the right kind of mortgage in this market can be a really difficult job. Most people try to avoid adjustable rate mortgages, because in that case your payment may increase from time to time. But even if you succeed in finding a fixed rate mortgage, there is a high chance that the fixed monthly payment may increase. The main reason behind such hike is your escrow account.

Escrow Account: In case your borrowings exceed 80 percent of the total value of the property, then you will be asked to open an escrow account by your lender for your own benefit. Apart from the fixed payment every month, you also have to pay your lender property taxes, insurance and other expenses that are necessary. All these expenses are deposited into your escrow account and gets broken down into monthly payments. Thus, it becomes much easier for you to pay. You don’t have to pay a lump sum amount of money at once.
The reasons behind the increase in mortgage payment are:

1. Property taxes: Property tax is the main reason behind the increase in the fixed monthly mortgage. They can fluctuate very frequently, especially if you live in a posh location. Increase in the property value, change in the tax structure of the government or home improvements can end up increasing your monthly payment.

2. When these rates increase, lenders are also forced to collect more money in your escrow account to cover up all the additional costs. As a result, your monthly mortgage increases. You have the option to file an appeal against the increase in property taxes. But there is no guarantee that the ruling will be in your favor.

3. Homeowners insurance: Just like property taxes, homeowners insurance can also end up increasing your monthly mortgage. If you are investing in a large remodel project, then there are many extra costs like repairing expenses or some additional constructions. As a result, the homeowners insurance cost will rise, which in turn will result in the increase of your monthly mortgage.

Lender error: Sometimes, your lender may by mistake make some wrong calculations in calculating the property tax or insurance amount. This means that you will have to pay more in your escrow account to cover up the costs. Although such mistakes are completely unintentional, but you are the one who will suffer. You will have to end up paying an increased monthly mortgage. Hence, it is your responsibility to make sure that all the costs are properly calculated.

Hence, it is very important that you shop for your mortgage very carefully. Jerry Stiles, mortgage broker can help you out in this regard.

Common Mistakes Made When Applying For a Mortgage Loan

Common Mistakes Made When Applying For a Mortgage Loan
Common Mistakes Made When Applying For a Mortgage Loan
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Did you know that some mortgage applications are turned down just because of a few simple mistakes? Here are some of the most common errors made by those looking for a mortgage loan. Take a look at them; maybe you can identify or if not hopefully avoid doing them in the future. This could save you some money on your mortgage.
First of all, when it comes to the amount of down payment to apply towards the purchase, some people are unsure of exactly how much. The more money that is used towards the acquisition for a deposit means there is less of a risk to the lender, along with cheaper interest rates. Just remember to stay within your budget and financial resources.

Unfortunately, not all mortgage loans are processed. It would be in your best interest to have a talk with your mortgage broker about his track record. Does he provide you with any guarantees?

Apply for a mortgage loan is not that familiar of a process for Americans, being that it is not something we do every day. It is important that you work closely with your mortgage broker and try to understand the mortgage process. Stop and ask any questions you might have, and make sure that you are working with someone who is willing to help you out.

A common mistake made by prospective homeowners is choosing a lender that has limited options. It is important that you go with a lender who offers you a range of mortgage products. Figure out your needs and make sure that they will be met, before deciding on that broker. Look for a mortgage broker with many connections and who will be able to meet your needs accordingly.

Some people believe it is in their best interest to get large purchases paid off before going into a mortgage. Lenders take a look at your total debt to income ratio when assessing applications. It is best to leave expenditures along until the mortgage has been drawn up.

Everyone would like to get the best interest rate possible on their mortgage; this is a goal. Just keep in mind that with every application there also is a credit check. Too many of those will eventually affect your credit rating. This is where your mortgage broker should be helpful with any insight into the market. They should be able to discuss their lenders with you and cut out any need to process applications just for the sake of establishing interest rates.

Let’s be honest; just about everyone has had some form of financial difficulty in their lives. Of course, when it comes time to apply for a mortgage loan, some believe it is better not to be forthright with their entire financial past. Your broker and lender are there to help you, but it’s better, to be honest, upfront so it can be dealt with and go from there.

You cannot keep any part of your financial or credit past a secret.

Take a look at your past year when it comes to paying your bills. Have you been on time or possibly even missed any of those payments? This could have an adverse effect when applying for a mortgage loan.

Ultimately, depending on your record, this could end up in being refused the loan. Just make sure you are on top of your finances, not missing any payments and paying on time.

If you are looking at getting a mortgage loan, now is the time to work really on keeping your debt as minimal as possible. By keeping your credit balances low or even paying them off, will result in the best terms for your mortgage.

The common mistake some people make when committing to a mortgage is not having all of the facts from the beginning. Make sure you understand what are the closing costs and any ongoing costs. When you are comparing lenders, just a fraction of a percent might not seem like much, but make sure you do the math. Over the term of your mortgage loan, that can add up.

Just make sure you get all of the facts before taking out a mortgage loan. Try to avoid the common mistakes, take care of your finances and before you know it, you will be on your way to owning your home.