Thursday, June 14, 2018

Getting to the Bottom of 6 Common Mortgage Myths

What six mortgage myths should all homebuyers be aware of? Today we will be covering these common misconceptions.

Today we are going to go over some of the worst pieces of mortgage advice that homebuyers actually believe.

1. Do not bother getting pre-approved. People hear this all the time, but it is absolutely false. Even if you know that your credit is good and that you are financially capable of a home purchase, buyers in today’s market cannot afford to submit an offer without a pre-approval letter. Additionally, getting pre-approved ahead of time will save you from falling in love with a home you can’t afford.

2. You must get a mortgage from the bank you already use. It is a common assumption that if you have an account with a bank, you have to work with that same bank when getting a mortgage. Actually, this is not a good idea in most cases. A better idea is to work with a mortgage professional. These experts have one job: to get you to the closing table.

3. You shouldn’t bother reading the fine print. There is a lot of terminology used in mortgage contracts that might be unfamiliar to most buyers. But this does not mean you should not pay attention to what you sign. If you are not confident reading through all of these documents alone, working with a qualified professional to dissect each page can help you better understand what exactly you’re agreeing to.

A mortgage professional should instead advise buyers to borrow based on what is feasible, not what is possible.

4. You should always go with the lowest interest rate. It may sound strange, but sometimes a higher rate is better. It is more important to look at all aspects of the loan and choose a program that works best for you as a whole, rather than focusing too intently on the interest rate alone.

5. First-time homebuyers are guaranteed free money. Mortgage professionals do love helping first-time buyers, but not all new homebuyers can or will qualify for certain programs. Also, not all first-time homebuyer programs are all that great to begin with. Sometimes a lower monthly payment means more expenses at the closing table, so it is important to consider all aspects of a deal before making a decision.

6. You should borrow as much as you are approved for. The issue with this way of thinking is that what a person qualifies for is not the same as what they can afford. A mortgage professional should instead advise buyers to borrow based on what is feasible, not what is possible.

If you have any other questions or would like more information, feel free to give us a call or send us an email. We look forward to hearing from you soon.

Thursday, April 19, 2018

Questions Your Loan Estimate Will Answer for You

When applying for a mortgage, your loan estimate will answer eight critical 
questions you’ll likely have.

Your loan estimate is the most important document you’ll see when applying for a mortgage, and here are the eight critical questions it will answer for you once you receive it:

1. How much am I borrowing?
Your loan estimate will break down exactly what your loan amount is. On the same page, it will also tell you what your cash-to-close amount is and your total closing costs.

2. What’s my interest rate? This document explains, clear as day, what your interest rate is. Remember, the rate your lender gives you is locked in unless you’re getting a “floating” rate.

3. What’s my monthly payment?
Your loan estimate also breaks down your principal and interest payments (i.e., what gets paid to the bank), your tax and insurance payments (what gets paid out to the third parties), and any mortgage insurance or HOA dues. Your HOA dues will not be included in your monthly mortgage payment, and your loan estimate will notify you of this.

4. Is my rate fixed or adjustable? Back in the day, the old loan estimate form wouldn’t say if your rate was fixed or adjustable, but the current one does. In my opinion, you should always get a fixed-rate loan unless you’re an investor.

Your loan estimate should be within $300 to $400 or your actual cash-to-close amount.

5. What are the costs of taking out a mortgage? There are many misconceptions floating around regarding this subject, but there are really only a couple fees you need to shop for. When you’re looking at your fee, your lender will show you what their origination charges are, along with their application, underwriting fees, and other things of that nature. These fees typically range from 0.5% to 2% of the overall cost. The best deals will normally only require a one-time-only fee of $1,500-or-less up front. Make sure when you’re looking at your fees, you’re looking at the overall fees, because the rest of the fees are estimates for third parties which your lender has no control over.

6. Am I being charged points? This question can be construed a couple different ways. Some banks charge an origination point, but you can also pay points that are considered discount points. This means you know you’ll be in your house for a long time and you want to pay an additional fee to reduce your interest rate now to reduce your payment over the life of your loan and save money.

7. How much am I paying for an appraisal? Most appraisals will be paid for in advance by the borrower, and a typical appraisal fee costs between $500 and $700. In most cases, your lender will ask for your credit card in advance so that when it’s time for the appraisal, they can just charge you directly for it.

8. How much money do I need to bring to the closing? The total out-of-pocket dollar amount you need to pay will be broken down on the second page of your estimate document. In most cases, your loan estimate should be within $300 to $400 or your actual cash-to-close amount.

If you have any further questions about loan estimates or you have any other mortgage needs, don’t hesitate to contact us. We’d be glad to help you.