How Power of Attorney Applies to Mortgage Borrowers

In times when a homeowner becomes unable to handle tasks related to their mortgage, a Power of Attorney (POA) may come into play. POA is a legal instrument that allows an authorized person to act on behalf of the borrower to manage the home loan.

Understanding Power of Attorney

Power of Attorney allows an authorized individual (the “agent”) to handle mortgage matters for the original borrower (the “principal”). This is especially relevant when the borrower is unavailable, incapacitated, or otherwise unable to handle loan servicing tasks directly.

POA Requirements

In order for someone to assume POA on behalf of a borrower:

• A valid, notarized POA document with clear authority to act on mortgage matters.
• The POA must be specific enough to cover the intended actions (e.g., “authority to manage mortgage obligations”).
• In some cases, a durable POA is required. In contrast to a regular POA, a durable POA retains the power to act on the borrower’s behalf even if the borrower becomes incapacitated.
• We may request verification of the principal’s (borrower’s) status (for instance, proof of incapacity or a death certificate).

Common Uses in Mortgage Servicing

Once someone takes up POA for a borrower and becomes their “agent,” they’re typically able to make decisions related to the mortgage that might include:

• Loan modification requests: Negotiating or submitting documents on behalf of the borrower.
• Payment management: Making payments, setting up auto-pay or resolving any delinquency issues.
• Loss mitigation: In cases of hardship, the agent may initiate forbearance or repayment plans.
• Foreclosure prevention: The agent can respond to notices, request reinstatement quotes or pursue alternatives like short sales.

Source

Common Mortgage Mistakes to Avoid

Securing a mortgage for your home is a major financial milestone. You want to ensure you choose the right mortgage and experience a smooth application and approval process. 

Mistake #1: Ignoring the Full Financial Picture

It’s critically important to understand what your monthly budget will look like as a homeowner. Your mortgage shouldn’t be a big burden on your finances. Follow these tips to maintain a comfortable budget:    

• Reference the 28% rule: Some experts suggest that your mortgage payment should account for no more than 28% of your income.1 You can use this as a benchmark to see what you can afford.
• Use a Mortgage Calculator: Have a price range in mind for a new home? 
• Factor in All Parts of Your Monthly Mortgage Payment: Mortgage payments typically aren’t limited to principal and interest – they usually also include homeowner’s insurance and property taxes, which will vary depending on the property’s location. 
• Add Up the Rest of Your Budget: Account for typical monthly expenses (groceries, gas, cell phone bill, etc.) and then add in planned future costs like childcare, education or retirement plans. Here’s a more detailed guide to budget setting.
• Leave Room for Emergencies: Don’t let unexpected costs knock your budget off balance. Budget some wiggle room for home repairs or other needs that arise.

Mistake #2: Getting Scared Off by the Down Payment

If you don’t have enough money saved for a 20% down payment, homeownership may seem out of reach. But you should know that there are loan programs that allow you to get a mortgage while making a smaller down payment, if you qualify.

• A Federal Housing Administration® (FHA) loan may enable you to qualify with as little as 3.5% down. It also offers flexibility on your debt-to-income (DTI) ratio, and you may qualify with less-than-perfect credit. Learn more.
• HomeReady® and Home Possible® loans are designed to grant homeownership to those with low-to-moderate income for as little as 3% down.
• Veterans Affairs (VA) loans are available to active-duty Military, Veterans and their families. Eligible borrowers may be able to put as little as zero money down. Learn more.
• U.S. Department of Agriculture (USDA) loans are available to those with low-to-moderate incomes living in less populated areas, and may enable borrowers to put no money down.

Mistake #3: Not Getting Pre-Approved**

If you’re putting an offer on a great home, there’s a good chance you’re not the only potential buyer vying for a seller’s attention. Don’t get lost in the buying crowd – make your offer stand out by adding a pre-approval letter from your lender.

• Give Your Offer Weight: Pre-approval shows sellers and real estate agents that you’re serious about buying and you’ve got the finances to back it up.
• Have a Clear Financial Benchmark: Pre-approval sets a clear financial limit on how much home you can afford so you don’t waste time during your search.

Pre-approval requires you to verify your financial situation to a lender with documentation. Your lender will also perform a detailed check of your credit history.

Mistake #4: Making Big Financial Changes During the Approval Process

Once your mortgage application is submitted, sudden financial changes may raise concerns for lenders, and might affect their approval determination.

• Notify Your Lender of Job Changes: Switching employers or changing to a new pay structure is material to your ability to repay a loan. Be sure to notify your lender as soon as possible if any details regarding your income change.
• Delay Large Purchases: Getting a new line of credit or buying big-ticket items like a car, furniture sets or large appliances may alter your debt-to-income ratio.
• Thoroughly Document Large Deposits: Any significant bank transfers – even between your own accounts – have to be documented to comply with underwriting guidelines.
• Delay Credit Inquiries: If you pull your credit or another party makes a credit inquiry, your lender will likely need to verify that no new debt has been incurred, which could delay or impact your loan approval process.

Mistake #5: Neglecting to Plan for Closing Costs

First-time homebuyers may forget about these costs until they’re committed to a new home, which could lead to stressful surprises at closing.

Closing costs are typically between 2-5% of the home’s purchase price and include things like appraisal fees, loan origination fees, discount points, real estate agent commissions, attorney’s fees, the title search, title insurance and more.

Make sure you’re prepared for these expenses, and know that closing costs typically vary depending on the price of the home, the property’s location and your lender, among other factors.

Mistake #6: Not Consulting with A Mortgage Professional

Sometimes, getting a mortgage can feel like a very impersonal transaction. At Newrez, we want to give our borrowers top-tier guidance so they truly feel they’ve found the right mortgage for their lifestyle and financial circumstances. Source

Happy Independence Day!

 

Happy Independence Day from us at Work and Associates Home Loans!

We hope you have a safe holiday weekend!

Phone: 916-847-3090

1350 Old Bayshore Hwy Ste. 520

Burlingame,  CA  94010

margeate@workhomeloans.com

NMLS ID 394275 | DRE ID 01769353

What To Look For When Buying A House

Buying a house is a major decision. It’s critical to know what to look for when buying a house so you enter the process with clarity and purpose. Having criteria for your dream home and neighborhood could mean the difference between finding the right fit—or making a mistake. 

Here are some key criteria to consider when buying a home: 

•  Price. What can you afford to spend on a property? The pre-approval letter from your lender will include the maximum loan amount you qualify for. Consider your down payment amount and what you can afford in monthly mortgage payments coupled with recurring debts and household expenses (like daycare, groceries, utilities, tuition, etc.). You’ll also want to have savings set aside for home maintenance and major repairs. 

• Location. The neighborhood, city, town or state you want to live in is almost as important as a home’s amenities. Do you care about peace and quiet, or proximity to recreation or entertainment? What about being close to shopping, dining, grocery stores, schools and job hubs? 

• Commute time. How long would your commute to and from work and/or school be? Will you have easy access to public transportation and how important is that for your day-to-day needs? 

• Schools. If you have or plan to have children, you’ll want to research the quality of the schools a home is zoned for. Pay attention to school ratings, test scores, teacher-to-student ratios and other success metrics to evaluate schools and school districts in the areas where you’re looking for a home. 

• Home type. Owning a single-family home tends to come with higher upfront costs and maintenance responsibilities than buying a condo or townhome. Condos and townhomes tend to be smaller and less expensive. However, you’ll likely pay higher monthly homeowners association or condo fees for shared amenities, services and maintenance. 

• Design and upgrades. A new construction home is brand new, energy-efficient and can be tailored to your design tastes. The same goes for a flipped home, which is a property that is bought, fixed up and resold in a short timeframe. With a flipped home, you won’t have a say in design elements, but you’ll likely pay more than an existing home because it’s been upgraded. Or you can buy an existing home that may need to be updated but the price might be lower. 

• Condition. Some properties may need minor cosmetic repairs like new paint and carpet, while others need significant renovations or require you to replace major costly systems. Do you have the extra cash, time and energy to account for a house that’s not move-in ready? 

• Space. Consider how many bedrooms, bathrooms, offices and other spaces you may need. Do you want a large kitchen or a specific number of bedrooms to accommodate a growing family? Does the property check off all of the boxes right now—or does it have the potential to add those spaces in the future? 

• Energy efficiency. Utility bills can impact your monthly budget. How’s the property’s energy performance? What would need to be done to improve it? Are the appliances, windows and other structures energy-efficient? What direction does the home face and how does that impact energy usage? 

• Square footage. How big does the home need to be to match your lifestyle, family and storage needs? Keep in mind the larger the home/property acreage, the higher your costs to maintain it. A larger home also means you’ll pay a higher purchase price. 

• Parking. Do you want a garage/off-street parking, or are you okay with parking your vehicle on the street? Do you need other outdoor storage spaces for a boat or RV? 

• Property additions. Do you want a property with the interior or exterior space to extend the property or convert the loft or garage into an additional room? Is there a basement space you could finish down the road to add to your livable square footage? 

• Outside space. Do you want a garden, patio or back deck? How much maintenance are you able and willing to do? If you’re buying a townhome or condo, will you have access to any private outdoor spaces, or are they shared with other residents? 

• Historical district. Check if the home is located within a historic district. This might impact your ability to extend the property or make changes to its exterior. 

• Potential drawbacks. Is the property on a busy road, next to a highway or railway track, in a food desert or in a high-crime area? Decide what issues you are willing to live with before you buy. These properties may also take longer to resell and be harder to rent out. Source

Contact us with any questions regarding buying a home, we would love to assist you! 

Phone Number: 916-847-3090

DRE ID # 01769353

NMLS ID # 394275

What is an FHA loan?

An FHA loan is a type of mortgage insured by the Federal Housing Administration (FHA), which is overseen by the U.S. Department of Housing and Urban Development (HUD). While the government insures these loans, they’re underwritten and funded by FHA mortgage lenders. Many big banks and other types of lenders offer them.

FHA loans have a low minimum credit score and down payment requirement, which makes them especially popular with first-time homebuyers. You can get an FHA loan with a credit score as low as 580 if you have 3.5 percent of the home’s purchase price to put down, or as low as 500 with 10 percent down. These flexible underwriting standards are designed to help more borrowers become homeowners.

You can’t buy just any home with an FHA loan, however. You can’t use this loan to buy an investment property or vacation home. Based on your credit and finances, the lender determines how much mortgage you’d qualify for within the FHA loan limits for your area.

Who are FHA loans best for?

FHA loans are generally best for borrowers with lower credit scores, limited down payment savings or both. This might include first-time or younger homebuyers, or those with smaller incomes.

How do FHA loans work?

FHA loans work like most other mortgages, with either a fixed or adjustable interest rate and a loan term for a set number of years. There are two term options: 15 years or 30.

You’ll also pay closing costs for an FHA loan, such as appraisal and origination fees. The FHA allows home sellers, a home builder or a mortgage lender to cover up to 6 percent of these costs.

To insure these loans against default — that is, if you were to stop repaying your loan — the FHA requires borrowers to pay mortgage insurance premiums, or MIP. These go into the Mutual Mortgage Insurance Fund (MMIF), which helps cover loss claims. Although you’ll pay the premiums as the borrower, FHA mortgage insurance protects the lender — not you.

FHA loan requirements

Here’s an overview of the requirements for an FHA loan:

• FHA credit score: As low as 580 with a 3.5 percent down payment or as low as 500 with a 10 percent down payment
• FHA down payment: At least 3.5 percent down if your credit score is at least 580, or at least 10 percent down if your credit score is between 500 and 579
• FHA debt-to-income (DTI) ratio: At most 43 percent (up to 50 percent in some cases)
• FHA occupancy rules: Primary residences between one and four units
• FHA mortgage insurance premiums (MIP): An upfront premium of 1.75 percent of the loan principal, typically paid at closing; plus annual premiums between 0.15 percent and 0.75 percent depending on down payment and loan amount and term, typically paid monthly

FHA minimum credit score

If you put just 3.5 percent down, the minimum credit score for an FHA loan is 580. You can qualify with a score as low as 500, but you’ll need to make at least a 10 percent down payment. Keep in mind that the FHA sets this limit, but individual lenders might require a higher score.

FHA down payment

For an FHA loan, you’ll need a down payment of at least 3.5 percent. This minimum increases to 10 percent if your credit score is between 500 and 579.

FHA loans allow borrowers to use down payment funds from sources other than their savings, such as a gift from family. Borrowers might also be eligible for down payment assistance to help cover the cost.

FHA debt-to-income (DTI) ratio

To meet the DTI ratio requirements for an FHA loan, your combined monthly debt payments, including your mortgage, shouldn’t exceed 43 percent. No more than 31 percent of your income should go toward your mortgage payments.

That said, your lender could make exceptions for your overall DTI up to 45 percent, 50 percent or even 57 percent with an FHA loan, assuming you have mitigating factors like a lot of liquid assets or can make a sizable down payment.

FHA mortgage insurance

All FHA loans require you to pay mortgage insurance, which is split into two components:

• Upfront premium: 1.75 percent of the loan amount, which is paid either at closing or incorporated into the final loan amount
• Annual premiums: Amount varies based on down payment, loan amount and loan term

For example, if you’re an FHA borrower who opts for a 30-year term and a 3.5 percent down payment, you’ll pay 0.55 percent of the loan amount, divided by 12 and added to your monthly payment. That means if you borrow $300,000, you’ll pay $1,650 a year — or $137.50 monthly — for MIP. Source

DRE ID # 01769353

NMLS ID # 394275

What Is Mortgage Refinancing?

Mortgage refinancing can help homeowners save money by reducing their interest rate and improving the terms of their mortgage. If interest rates have dropped since you first took out your mortgage, refinancing may lead to significant savings.

However, refinancing may not pay off in every situation. Learn what mortgage refinancing is, how it works and when it might save you money.

How does a mortgage refinance work?

Mortgage refinancing allows you to replace your existing mortgage with a new one, ideally with a lower interest rate and more favorable terms. When you refinance, you'll receive money up front to pay off your old mortgage. Then, you'll begin paying the balance of the new loan.

If you're considering a refinance, you have a few options:

• A traditional refinance covers only the amount you still owe your lender, known as the principal.
• A cash-out refinance, on the other hand, replaces your old mortgage with a larger one that allows you access the difference between the two loans in cash, which can be used to fund major expenses, such as a college education, or renovations that might increase the overall value of your home.

Common reasons for mortgage refinancing

You might refinance your mortgage for a number of reasons:

• Lower your interest rate. If market conditions or other circumstances have changed over the life of your loan, you may qualify for a new mortgage with a lower interest rate. For example, interest rates may drop if the economy has improved since you first took out your mortgage. Alternatively, an increase in your credit scores may boost your creditworthiness in the eyes of your lenders, which may help you qualify for a better interest rate. Your credit scores are among the factors that lenders consider when setting the interest rate and other terms of your mortgage.

• Change the mortgage length. Refinancing may allow you to shorten the length of your loan. This means you'll pay off the mortgage faster, leading to fewer interest payments over time. Depending on your new loan's interest rate, however, a shorter term may mean you owe higher mortgage payments each month.

• Change the mortgage type. If you have an adjustable-rate mortgage (ARM), your interest rate may change in response to market conditions. Fluctuations in your interest rate can get expensive, especially if you took out your loan when rates were low. To help stabilize or lower your interest rate, you might refinance to a fixed-rate loan.

• Access cash. A cash-out refinance allows you to borrow against your home equity with a new loan that's worth more than what you owe on your current mortgage. You'll then receive a lump sum in cash you can use to pay for major purchases. Cash-out refinance loans typically have lower interest rates than personal loans or credit cards.

How to know when to refinance your mortgage

Should you refinance or not? Unfortunately, there's no definitive answer to this question. Whether a refinance is right for you depends on your unique circumstances.

If you're considering a mortgage refinance, evaluate whether your financial situation has meaningfully changed since taking out your original loan. Have your credit scores improved? Have you increased your income significantly? If either applies to you, you may now qualify for a better offer from your lender.

Next, determine if market interest rates have dipped in the intervening years. Consider refinancing only if your lender offers a new interest rate that is at least 2% lower than your current rate. You'll also need to consider the current length of your mortgage. If you only have five years of payments left, it's likely best to stick with your current loan. If your mortgage is new, be aware that most lenders have a waiting period of zero to 210 days before you'll be able to refinance. Attempting to refinance before this period is up could result in a significant penalty fee.

Finally, don't forget to factor in closing costs — a collection of fees and other expenses you'll pay on closing day. These generally total between 2% and 6% of the loan amount, adding a high cost to your refinanced loan. Before you sign on the dotted line, make sure that your closing costs don't exceed any potential savings. Source

DRE ID # 01769353

NMLS ID # 394275

Happy Fathers Day

 

Happy Fathers Day from us at Work and Associates Home Loans to all of you!

Phone: 916-847-3090

1350 Old Bayshore Hwy Ste. 520

Burlingame,  CA  94010

NMLS ID 394275 | DRE ID 01769353