Know Your Financing Options, Your Lender, and Your Loan

When considering your financing options, you’ll want to review many different things about the loans offered to you. Here you’ll find a basic overview of home loan features and the things you should consider as you shop for a lender or a loan.

Know Your Lender

Home loans are available to consumers from thrift institutions – commercial banks, mortgage companies, credit unions,and mortgage brokers. You may also obtain a loan through a mortgage broker. A mortgage broker is unlike other lenders in that the broker does not lend money to you directly. A broker will help find you a lender and secure the terms of your arrangement.

Mortgage Broker vs. Traditional Lender

A broker may have access to several lenders and therefore can offer you a wider selection of loan products and terms. He or she can help you shop for the best deal based on your circumstances. (A Broker is not obligated to find you the best deal possible, so be sure to ask questions.)

For their work, brokers are paid a fee in addition to the lender’s origination fees. Brokers set their own compensation, so you’ll need to ask anyone you speak to how their fees are determined.

Even if you decide to work with a traditional lender, ask if a broker is involved. Many financial institutions act as both lenders and brokers, so you should ask if a broker is involved on any loan you are offered.

It’s always a good idea to check out the reputation of any lender you consider working with. The National Association of Mortgage Brokers or the Better Business Bureau can tell you if a lender is in good professional standing.

 

Know Your Loan Types

Not all home mortgages are structured the same. There are several borrowing options for home buyers and the type of loan that you choose should work for your unique financial situation.

Fixed Rate (Traditional) Loan

These loans are usually structured with repayment terms of 15, 20 or 30 years. The lender will agree to charge a fixed interest rate over the life of the loan. With this loan type, your monthly mortgage payments will remain the same for the length of the term.

Adjustable-Rate Loans (ARMs)

Also known as variable-rate loans, ARMs often offer a teaser rate for the initial period of the loan. This introductory interest rate is usually lower than rates offered for fixed-rate mortgages. The interest rate will fluctuate over the life of the loan based on market conditions. Changes in rate happen at certain time periods, and the lender can set both a maximum and minimum on the rate of fluctuation.

Federal Housing Administration (FHA) Loans

Federal Housing Administration (FHA) insured loans are made by private lending institutions such as banks, savings & loans, or mortgage companies to eligible borrowers for the purchase of a home. To secure an FHA loan, a borrower must apply and qualify with a certified FHA Lender.

Additionally, eligible borrowers must be able to pay a minimum of 3.5% of a home’s purchase price. If the loan is approved, FHA will insure a portion of the loan’s value to the lender.

Veterans Administration (VA) Guaranteed Loans 

VA Home Loans are available to qualified veterans and their spouses. Private lending institutions issue the loans which are in turn guaranteed by the Veteran’s Administration. The VA does not require any down payment on VA Guaranteed Loans and allows the borrower to receive a competitive, fixed interest rate.

The best type of loan for you will likely be based on the down payment you can afford and the length of time you plan to spend in your home.

If you’re considering a variable rate mortgage, you’ll want to be sure to understand what a rate increase could do to your monthly payment. Be sure to ask when and how your loan payment will vary.

Know Your Rate – And Your Terms

When you start shopping for a loan, you’ll start looking at interest rates. The interest rates, terms, and fees for a mortgage will be based on your qualifications as a borrower and on the current lending market. Keep in mind though that finding the right loan is not just about finding the lowest interest rate possible. Mortgage institutions offer loans of varying terms – typically 30, 20, or 15 years. Shorter term loans can save you thousands of dollars over the life of your loan if you can afford a higher monthly payment.

You’ll want to get a complete picture and break down of what a given offer means to you on a monthly basis as well as how much money you’ll be spending over the life of the loan.

At a minimum, you should request quotes with a few different scenarios from a few lending institutions and compare the financial impact of each situation before you determine your best course of action. Shopping around is worth your time!


When you receive quotes – ask your lender whether you’re being quoted the lowest rate for the day or week. Ask what the loan’s Annual Percentage Rate (APR) is. The APR will express as a yearly rate all of the fees associated with a loan.

If you are satisfied with a proposed interest rate, you can ask your lender if he or she can lock-in the quoted rate. There may be a fee associated with locking in a rate and the agreement will generally only last 60 to 90 days.


Know Your Fees

Most loans have fees in addition to the total amount you are borrowing to finance your home. You can sometimes borrow the money needed to cover these fees, but that will obviously increase the overall amount of debt you undertake. Some fees are paid up front, and others are not due until closing.

Points

The lender or broker can charge you points on your mortgage. One point equals 1 percent of the loan amount. These are simply fees paid to the lender or broker that are often linked to the interest rate, and are usually paid in cash to the lender or broker at closing. A lender may offer you a lower interest rate, but charge more points, so it’s important to compare offers.

Loan Origination Fees

The institution that actually loans you the money will generally charge on origination fee for processing the loan. They are often expressed as a percentage of the amount of the loan.

Underwriting Fees

Certain lenders will charge a fee to investigate your creditworthiness and determine if you are likely to repay your loan.

Broker Fees

Typically paid at closing, a mortgage broker may charge you a fee in addition to the origination fee. If you are working with a broker, be sure to check with them what their fee is.

Transaction / Settlement / Closing Costs

These fees lump together several charges for application fees, title examination, abstract of title, title insurance, property survey fees, deed preparing fees, other mortgage fees and settlement documents, attorney fees, recording fees, notary fees, appraisal fees, and credit report fees.


Never hesitate to question a fee that you don’t understand. Your lender should give you a thorough explanation and make sure that you know what you’re paying for.

Certain fees, like the broker’s fee or the number of points assessed on a loan, are negotiable. It never hurts to ask your leader if they can get you a better deal.

In order to empower the consumer with the information necessary to make informed buying decisions, government regulations require lenders to provide two forms to borrowers on the loans for which they are applying. The first form must be submitted to you within three days of submitting a loan application to a lender and this is called the Loan Estimate. This form explains key features, costs, and the risks associated with your selected mortgage. The second form is provided no later than 3 days before your scheduled closing and is called the Closing Disclosure form. This form details all costs associated with your purchasing transaction. If you have any questions or concerns about your loan when you review these documents, be sure to ask them right away.


Know Your Down Payment
and Private Mortgage Insurance

The largest upfront cost in purchasing a home is the down payment. Most traditional lenders expect borrowers to put at least 20% of a loan’s total amount down.

Borrowers who are unable to do so are required to purchase Private Mortgage Insurance (PMI). This insurance protects the lender in case of default by the borrower.

If PMI is required, ask your lender what the total cost of the insurance will be, how much it will increase your monthly payment, and how long you will be required to carry the insurance.

Be sure to get a clear indication of the down payment percentage required by your lender. You will also want to know what kind of documentation your lender requires to verify that you have funds for the down payment.

Lender Interview Cheat Sheet

  1. What kind of loans do you offer?
  2. What kind of loan would you recommend for me?
  3. What are the advantages and disadvantages of this loan structure?
  4. What is the current interest rate? Is the rate quoted the lowest for that day or week?
  5. What is the Annual Percentage Rate (APR) of an offered loan?
  6. Is the loan rate adjustable or fixed?
  7. What are the discount points and origination fees?
  8. What are all the costs of the offered mortgages?
  9. If the rate is adjustable – how will rate and loan payment vary?
  10. What are the qualifying guidelines for this loan?
  11. What is the lender’s required down payment for this loan?
  12. What documents will need to be provided?
  13. What are the closing costs?
  14. Will the lender guarantee the GFE (Good Faith Estimate) of settlement charges and loan terms?
  15. Does the lender offer a loan rate lock? Is there a fee for the rate lock?
  16. Is there a prepayment penalty?
  17. Are you equipped to approve loans in-house?
  18. How much time do you need to fund the loan?
  19. Will mortgage insurance be required?
  20. Can the term of the loan be extended?
  21. Is there a cap on payment adjustments?

PRE-APPROVAL vs. PRE-QUALIFICATION

Before you begin your home search in earnest, I highly recommend that you work with a lender to get pre-approved for a home. Many home buyers will talk to a lender quickly and get pre-qualified, but this is not the same thing.


Pre-approved buyers are ahead in the home buying game.

If you make an offer on a home and then apply for a loan instead of the other way around, you are at the mercy of the lender who now knows that you don’t have time to shop around.

A pre-approval letter from a lender will also give you an edge if you find yourself in a multiple offer situation. Pre-approved buyers generally close escrow more quickly, since most of the paperwork has already been taken care of.


Pre-Qualification is only a loan agent’s opinion that you’ll be able to obtain financing. No verifications are made, so formal approval is not issued.

Pre-Approval means your loan application has been taken through a rigorous procedure, including a review of your credit report. Pre-approval saves you the time of looking at houses you can’t afford.

 


Posted on January 23, 2019 at 5:48 am
Cindy Hill | Posted in For Buyers | Tagged , , , ,

Lender Interview Cheat Sheet – What to Know Before you Borrow

Lender Interview Cheat Sheet

Ready to speak with a few lenders?

Here are some key points to compare:

1. What kind of loans do you offer?

2. What kind of loan would you recommend for me?

3. What are the advantages and disadvantages of this loan structure?

4. What is the current interest rate? Is the rate quoted the lowest for that day or week?

5. What is the Annual Percentage Rate (APR) of an offered loan?

6. Is the loan rate adjustable or fixed?

7. What are the discount points and origination fees?

8. What are all the costs of the offered mortgages?

9. If the rate is adjustable – how will rate and loan payment vary?

10. What are the qualifying guidelines for this loan?

11. What is the lender’s required down payment for this loan?

12. What documents will need to be provided?

13. What are the closing costs?

14. Will the lender guarantee the estimate of settlement charges and loan terms?

15. Does the lender offer a loan rate lock? Is there a fee for the rate lock?

16. Is there a prepayment penalty?

17. Are you equipped to approve loans in-house?

18. How much time do you need to fund the loan?

19. Will mortgage insurance be required?

20. Can the term of the loan be extended?

21. Is there a cap on payment adjustments?


Posted on January 9, 2019 at 7:03 pm
Cindy Hill | Posted in For Buyers |

Pre-Approval vs. Pre-Qualification or Why Speak With a Lender First

PRE-APPROVAL vs. PRE-QUALIFICATION

Before you begin your home search in earnest, I highly recommend that you work with a lender to get pre-approved for a home. Many home buyers will talk to a lender quickly and get pre-qualified, but this is not the same thing.

Pre-approved buyers are ahead in the home buying game. If you make an offer on a home and then apply for a loan instead of the other way around, you are at the mercy of the lender who now knows that you don’t have time to shop around.

A pre-approval letter from a lender will also give you an edge when multiple offers have been made on a house. Pre-approved buyers generally close escrow more quickly, since most of the paperwork has already been taken care of.

Pre-Qualification is only a loan agent’s opinion that you’ll be able to obtain financing. No verifications are made, so formal approval is not issued.

Pre-Approval means your loan application has been taken through a rigorous procedure, including a review of your credit report. Pre-approval saves you the time of looking at houses you can’t afford.

I work very closely with some local lenders who have made my clients’ path to homeownership a stressfree and positive experience.  If you would like their contact information, please email or text me.  Happy to share.  cindyhill@jbgoodwin.com

Want to interview a couple of lenders?  Here is a link to my post Lender Interview Cheat Sheet.

Want to take a Homebuyer Class?  Here is a link to the current schedule: Free Homebuyer Workshop Schedule 2019


Posted on January 9, 2019 at 6:44 pm
Cindy Hill | Posted in For Buyers | Tagged , , , ,

Free First Time Homebuyer Workshop~ Jan. 19, 3-4 pm 1613 S. Cap of Tx Hwy

First Time Homebuyer Workshop

Jan. 19, 3-4 pm 1613 S. Cap of Tx Hwy

 

A partial list of topics we will cover:

Grow your family's wealth

The magic of growing equity

  • What are the benefits of homeownership in Austin?
  • How much can I afford?
  • How to find the right home.
  • How to make an offer.
  • Winning in multiple offer situations
  • What happens once an offer is accepted?
  • Getting to the closing table.
  • Getting the keys!

What happens during the initial homebuyer consultation?

These are some questions your Realtor® will ask you to help you narrow down your search criteria:

  • how you will live in your home? Do you work from home? Commute?
  • where do you work?
  • where do you play?
  • how long do you plan to stay in your first home?
  • is entertaining important?
  • do you have pets?
  • will you or do you have children?
  • are you an indoor or outdoor person?
  • are you ok with a little DIY or do you prefer a move-in ready home?

Search for homes. 

Tour homes. 

Make an Offer! 

 Sign Up Here .

 


Posted on December 28, 2018 at 12:27 am
Cindy Hill | Posted in For Buyers | Tagged , ,

What Every Seller Needs to Know About Closing- A Checklist to Close

Walk-throughs, closing costs, and other items to check off your list before the big finish!

Closing time. You did it!

If you’re here, then you’ve found a buyer, negotiated home repairs, and are ready to move out — and on. But before you can make this sale official (and get paid!), you still have a few items to cross off your list.

Closing Is the Final Step

Closing is when both parties sign the final ownership and insurance paperwork, and the buyer becomes the legal owner of the home.

Typically, the closing day takes place about four to six weeks after you signed a purchase and sale agreement. During this window, the buyer’s purchasing funds are held in escrow until all contingencies, like the home inspection contingency and appraisal contingency, are met.

Before You Close, You’ll Have a Final Walk-Through

Most sales contracts give the buyer one last chance to do a walk-through of the home within 24 hours of settlement. This is their chance to check that the property is in good condition, and to make sure the agreed-upon repairs were completed.

In most cases, no problems arise at this stage of the transaction. (If something is amiss, your agent can walk you through it.) The final walk-through mostly gives buyers peace of mind knowing that you, the seller, have adhered to the conditions of the sales contract and home inspection-related repairs.

Follow These Steps to Prepare for the Final Walk-Through

To help ensure that the walk-through goes smoothly, take these six steps ahead of time to prepare:

Step #1: Clean house. Your home should be spotless for the final walk-through. Assuming the buyer is taking ownership on closing day, you should be fully moved out at this point. But moving can be messy. After purging, packing, and moving, you may want to do one more deep cleaning.

Step #2: Leave owner’s manuals and warranties. Make the buyer’s life easier by providing all manuals and warranties you have for home appliances. Print physical copies and put these documents in one place for the new owner. If you have receipts from contractors for repairs, leave them with the manuals.

Step #3: Provide a vendor list. Give the buyer contact information for home contractors or maintenance companies that you’ve used in the past. These vendors are familiar with your home, and the new owner will appreciate having a list of servicers they can trust will take good care of their new home.

Step #4: Check for forgotten items. Do one more check throughout the home to make sure you’re not leaving anything behind. One exception: You may want to leave unused or leftover paint cans in the colors currently in use within the home — but confirm with the buyer first.

Step #5: Lock up. Until the settlement is complete, you’re legally responsible for the home — meaning you’d be liable if there’s a break-in before closing. So, the day before settlement, make sure to close window coverings and lock the entry doors. If a house looks un-lived in, it’s a welcome sign to burglars. It’s a good idea to leave a porch light on or to set an interior light to turn on and off with a timer.

If the final walk-through reveals an issue with the house, don’t panic. The standard protocol is for the buyer’s agent to immediately alert the listing agent that there’s a problem. Then, both parties work together to solve it. Typically, either the closing gets delayed or there is an additional negotiation, such as monetary deduction of the sales price. In other words: There are options, and your agent can help you through this

Up Next: The “Closing Disclosure”

Let’s assume the final walk-through is smooth sailing. (Woo-hoo!) What happens next?

You’ll get info about your closing costs from the title company.

Meanwhile, the buyer’s mortgage lender must provide the buyer with a Closing Disclosure, or CD, three business days before settlement. This is a formal statement of the buyer’s final loan terms and closing costs. As the loan borrower, the buyer is entitled to a three-day review period to see if there are any significant discrepancies between their CD and Loan Estimate (LE) — document buyers receive when they apply for a loan. The LE outlines the approximate fees the buyer would need to pay.

In most cases, there are no major differences between the CD and LE. However, if certain closing costs differ by 10% or more between the estimate and the disclosure, the buyer’s loan has to go back to the mortgage lender so that cost differences can be reviewed. If that happens, closing is usually delayed until the issue is resolved.

Expect to See These People at the Closing

The closing typically takes place at the title company with the following people either at the same table or in a separate room:

  • Your agent
  • The buyer
  • The buyer’s agent
  • A title company representative
  • The loan officer
  • Any real estate attorneys involved with the transaction

Remember to Budget for Closing Costs

Closing costs can vary widely by location, but you’ll generally pay closing costs of 7% to 10% of the home’s sales price. So, on a $300,000 home, you can expect to pay anywhere from $21,000 to $30,000 in closing costs. In most cases, these costs are deducted from your proceeds at closing.

Closing costs for sellers typically include:

  • The commission for the listing agent and buyer’s agent
  • Transfer taxes or recording fees
  • Loan payoff costs
  • Unpaid homeowner association dues
  • Homeowner association dues included up to the settlement date
  • Prorated property taxes
  • Escrow, title, or attorney fees

Be Sure to Bring These Things to Closing

At the closing you should have:

  • A government-issued photo ID
  • House keys, garage remotes, mailbox keys, gate keys, and any pool keys
  • A cashier’s check, or proof of wire transfer, if your closing costs are not being deducted from the sales price.  (Your escrow agent will assist you with this.)

Don’t Forget to Dot These I’s and Cross These T’s

Before you rush off to pick out paint samples for your new place, remember to do these two steps that sellers often overlook:

Transfer utilities. Coordinate with the buyer through your agent so that utilities — including not only gas and electric but also water and cable — are transferred to the buyer. Once you know the title has officially transferred, then cancel your homeowner’s insurance. You don’t want to be without coverage until the deal is legally finished- Closing Day. 

Change your address. You obviously want to receive your mail at your new home. Setting up a forwarding address will also ensure that you can be reached if there are any post-closing matters. You can file a change of address with the U.S. Postal Service here.

Finally: Celebrate!

At last, you have officially sold your home.  Congratulations!  Time to get started with the next phase of your life.  Go get ’em.  Again!


Posted on September 30, 2018 at 12:02 am
Cindy Hill | Posted in For Sellers |

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