What Is A Foreclosure?

Foreclosure is a process that’s triggered when a homeowner fails to make their mortgage payments. When a home is foreclosed on, a lender typically repossesses the property and attempts to sell it to recover their loss. Mortgage loans are secured by real estate. Because the home serves as collateral for the loan, a lender can legally repossess the property when a borrower fails to make their monthly mortgage payments.

What Is The Process Of Foreclosure?

While the foreclosure process may differ slightly from state to state, homeowners will likely experience common steps.

A lender contacts a homeowner to inform them of their delinquency and notify them about the possibility of foreclosure. The lender and homeowner explore options to keep the loan current. If the homeowner can’t bring their mortgage up to date, the lender may proceed with foreclosure. Depending on your state’s laws, your lender may file with a court to initiate foreclosure.

Early Intervention

Before a lender can proceed with foreclosure, the loan must be at least 120 days delinquent (with some exceptions). Lenders and loan servicers are required to make good faith efforts to contact a borrower about missed payments and foreclosure alternatives. A borrower can even take advantage of a few options to avoid losing their home even after a lender initiates the process. If there is no resolution, the lender usually initiates foreclosure once the borrower has missed at least four payments.

Foreclosure Counsel And Notice Of Default

Servicers or lenders referring a loan to foreclosure counsel is the first step in the foreclosure process. Depending on state laws, an attorney will initiate the process by filing a complaint or notice of mortgage default. Defaulting means a borrower has failed to repay a loan according to a lender’s terms.

Even after the first legal action, borrowers can apply for loss mitigation and look into options to avoid losing their homes.

Judicial Foreclosures Vs. Nonjudicial Foreclosures

There are two types of foreclosures: judicial foreclosure and nonjudicial foreclosure;

• Judicial foreclosures are usually more time-consuming than nonjudicial foreclosures. While all 50 states allow judicial foreclosures, some states require it. Judicial foreclosure requires a lender to file a lawsuit in court. The borrower receives up to 30 days to respond to the lawsuit. If they don’t respond, the court may rule for the lender, and the house can be foreclosed and sold. If they respond and go to court, the case will go before a judge to decide whether a settlement can be reached or the lender can foreclose.
• Nonjudicial foreclosure typically occurs when a mortgage has a power of sale clause, or the promissory note is tied to a deed of trust. If a borrower defaults on a mortgage with a power of sale clause, the lender doesn’t need to go to court. They can auction off the home after the warning and waiting period outlined in the state’s laws. In the case of a deed of trust, the trustee, usually a title company, can seize a property and sell it without a court order.

Eviction

If a homeowner can’t bring their loan current, eviction will likely be the next step in a foreclosure proceeding. Homeowners may receive a notice to quit from the lender to leave the home. How lenders contact homeowners varies by state. A letter or warning typically includes the timeline residents have to vacate the property – usually 3 – 30 days. Lenders may sue if residents ignore an eviction notice and stay in the home.

Foreclosure Added To Credit Report

A foreclosure is an adverse event that stays on your credit report 7 years from your first missed mortgage payment. Your existing credit history will significantly impact how foreclosure affects your credit score.

The hit your credit takes from a foreclosure can hurt your ability to purchase or rent a home. Many lenders won’t consider an applicant with a foreclosure on their credit report, but some lenders may be more forgiving, especially if the foreclosure happened years ago. Source

DRE ID # 01769353

NMLS ID # 394275

What Is Homeowner's Insurance?

 

 

Homeowners insurance helps offer financial protection to your home and everything inside of it when damages occur. It also helps provide liability coverage if someone is injured on or off your property. Watch this short video to learn more.

DRE ID # 01769353

NMLS ID # 394275

How Long Does the Mortgage Approval Process Take?

When you’re ready to buy a home, it seems like your closing day can’t come soon enough. But even after you find a house, make an offer, and get the good news that your offer is accepted, you still have a few more tasks before you receive your new house keys. But there’s great news: if you have a basic understanding of the mortgage approval process, how long it might take, and what factors might speed up the process, you are one step closer to a smooth, streamlined loan experience.

How Long Does the Mortgage Approval Process Take?

On average, the mortgage approval process takes 30 to 60 days — although it can be significantly shorter or longer, depending on the situation. If you are pre-approved or credit pre-approved for a loan before you start the home shopping process, your mortgage could close in as little as two to three weeks after your offer is accepted on a home.

With a pre-approval in hand, you’ll likely have a smoother home shopping experience, and you can submit offers with confidence — knowing that a reputable mortgage lender has already assessed your financial situation. Think of it this way: with a pre-approval, you and your lender are putting in more effort upfront — but that means that you’ll probably have a more streamlined, quick home loan process, as compared to a homebuyer who is not pre-approved.

What Could Delay My Mortgage Approval?

Whether you are pre-approved or not, the mortgage process can be delayed by a variety of factors. If you change jobs, have a change in your income, or even make a significant purchase (such as a car or furniture) during the approval process, the mortgage approval could be delayed or denied. If the lender requests additional documentation during the loan approval and you don’t provide it in a timely manner, this can also significantly delay the loan closing.

Other delays to the mortgage process have to do with the property itself. If the home inspection uncovers a big problem, such as mold, structural issues, or other major safety concerns, these can push back the closing date until they are remedied. Issues with the appraisal can also cause delays; if the appraisal value doesn’t meet or exceed the property’s sale price, the loan process could be deterred. Legal issues with the home title or deed (such as unpaid taxes or liens on the property) are another challenge that may delay a mortgage closing.

Also, contingency failures can put the mortgage approval behind schedule or even cause the financing to fall through entirely. For instance, if the buyer has a contingency that states they must sell their current property before purchasing their next home — and this doesn’t happen within the specified timeframe — the loan for their new home could be jeopardized. Another example of a contingency failing would be the buyer’s inability to secure homeowners insurance before the closing.

What Can I Do to Speed Up My Mortgage Approval Process?

Aside from getting pre-approved, there are a few things you can do to help the home loan process move along quickly, including:

Check Your Credit Score in Advance

Before you start the mortgage approval process, review your credit report to make sure there are no errors (this happens more frequently than you may think). More than one-third of American consumers found at least one mistake in their credit reports, according to a recent study by Consumer Reports. These errors can delay the loan process and even jeopardize your home loan approval. Another advantage of knowing your credit score is that it will help you narrow down which home loans you may qualify for — saving you additional time when you’re ready to choose a mortgage.

Be Completely Honest With Your Loan Originator and Their Team

When disclosing your financial information for the approval process, make sure you are transparent. Acknowledge any factors that may affect your loan approval, such as late credit card payments, additional streams of income, etc. This will help your processor and underwriting team move quickly through your financial information — without any “surprises” along the way.

Be Prepared to Provide Additional Documentation ASAP

Because the home loan process is unique to everyone, it’s likely that even the most prepared borrowers will need to provide an extra document or two in the middle of the journey. If your lender’s team asks for a document, be prepared to send it as soon as possible. Source

DRE ID # 01769353

NMLS ID # 394275

Mortgage Bankers vs. Mortgage Brokers: What’s the Difference?

The key difference between the two? Mortgage bankers directly loan you the money for a home; mortgage brokers serve as an intermediary, meaning they don’t approve your loan or directly provide the money for your mortgage — instead, they coordinate with the lender or bank on your behalf.

Pros of a Mortgage Broker

Each mortgage broker operates a little differently but, in general, here are some of the benefits you can expect if you decide to work with a mortgage broker:

Support with Paperwork

A broker can help guide you by specifying exactly what you need to provide in terms of documentation; because they work one-on-one with you, they’re less likely to request the same document twice, which may happen with a larger mortgage banker where multiple departments or employees are involved.

Loan Variety

Brokers may have more access to a variety of loans (since they’re not working with only one bank or lender), which could ultimately give you more options.

Challenging Situations

A mortgage broker may have more options if you have a less-than-favorable circumstance (for example, other lenders won’t qualify you for a loan because of a low credit score, lack of down payment, etc.).

Delegate Responsibility

A broker often allows you to be more “hands off” during the loan process, because they take on the bulk of the responsibility (for communicating with the lender, etc.). This may also save you some time.  

Pros of Mortgage Banker

A mortgage banker also offers unique benefits, such as:

No “Middleman”

Since you’re working directly with the lender, they are more likely to be 100% familiar with their loan products and can address any issues or challenges immediately.

In-House Operations

Mortgage bankers often have an in-house operations team; in most cases, this will streamline the loan process, since there isn’t an intermediary or outside source that needs to weigh in on paperwork, decisions, etc. 

Potential to Save Money

In many situations, working with a banker will save you some cash, since mortgage brokers charge a fee for their services; although, in some cases, the lender will pay this fee (this is something you’ll want to check on up front, if you consider going with a broker).

Close Sooner

Compared to a broker, a mortgage banker will often close your loan more quickly (sometimes, even earlier than you anticipated), since they are working with their own loan products and their own in-house staff — and no intermediaries are involved.

Which Should You Choose?

This really depends on your unique situation. If you’re just starting out on your home finance search, it can be helpful to get quotes from a variety of mortgage brokers and bankers.

Overall, if you have a fairly strong financial situation (good credit score, low debt-to-income ratio, etc.), you may save time and money by using a mortgage banker for your loan and avoiding the fees associated with mortgage brokers. On the other hand, there are brokers whose fees are comparable to mortgage bankers.

If you have a challenging or unique situation, such as a lower credit score, no down payment, or a high debt-to-income ratio, a mortgage broker might be better equipped to find a loan program for you. However, many mortgage bankers also offer loans for people with less-than-perfect financial circumstances. Again, it will take some research to find your best option. That’s why it’s important to start early in the process, so you can find the right fit for your home financing needs. Source

DRE ID # 01769353

NMLS ID # 394275

Fixed vs. Adjustable Rate Mortgages

 

 

Fixed rate vs. adjustable rate mortgages (ARM): what's the difference? Both fixed and adjustable rate mortgages have their own benefits, but one may make more sense for your financial situation. 

Learn more about the differences and figure out whether an ARM or a fixed rate mortgage is best for you with this Better Money Habits video. 

DRE ID # 01769353

NMLS ID # 394275

What Is a Homeowners Association (HOA), and How Does It Work?

A homeowners association (HOA) is an organization in a subdivision, planned community, or condominium building that makes and enforces rules for the properties and residents. Homeowners associations are run by a board of directors and typically collect monthly or annual fees to pay for common area maintenance and the upkeep of facilities.

Those who purchase property within an HOA’s jurisdiction automatically become members. Some associations can be very restrictive about what members can do with their properties. Others give residents more freedom.

How Homeowners Associations (HOAs) Work

Homeowners associations (HOAs) are usually formed within communities or neighborhoods of single-family homes or multiple-unit buildings such as townhomes or condominiums. An HOA is typically established to make and enforce rules regarding the properties within the jurisdiction. HOAs are composed of and run by the community’s residents. Membership is usually a requirement to buy a home within a community where an HOA has been established.

An HOA usually has a board of directors or governors. These groups are elected to enforce and oversee the HOA’s rules and regulations. An HOA typically describes its rules as restrictive covenants in a document called a Declaration of Covenants, Conditions, and Restrictions (CC&Rs).

CC&Rs set certain conditions for owners about the maintenance of their properties. These sometimes include structural restrictions such as the type of fences or landscape allowed. They may also include more minor aesthetic choices like the color of paint on a house.

A CC&R document may also outline the penalties for violating the guidelines in the agreement. These penalties can take the shape of fees or forced compliance. They can even be as drastic as litigation in some cases.

Homeowners Association (HOA) Fees

Some HOAs can wield significant financial and legal power over the property owners in their zone. HOAs collect monthly or annual HOA fees that depend on several factors:

• Type of property
• Number of properties in the group
• Location
• Amenities offered
• Operating expenses

The fees are typically $200 to $400 per month but they can range anywhere from less than $100 to upward of $10,000 in luxury neighborhoods or communities. HOA fees also often contribute to the association’s reserve fund which is set aside for major renovation projects or emergency use. In addition to regular fees, HOAs can also impose special assessments on homeowners when the association lacks sufficient reserves to pay for unexpected repairs on common areas such as sidewalks or parking lots.

The HOA’s board is usually responsible for the organization’s finances and it oversees the collection and management of funds. Along with setting dues and assessments, the board can slap fines on homeowners who break the rules or damage the common areas. HOAs can also place a lien on a property if a homeowner falls seriously behind on their dues.

Advantages and Disadvantages of Homeowners Associations (HOAs)

Advantages

The HOA provides regulations and guidelines for its members. These standards are upheld to preserve and enhance the community’s property values. The guidelines are often appearance-oriented so they deal with regulations for the cleanliness of the property, the condition of the property, and any repairs that are done to the property. The guidelines for HOAs are usually designed to help ensure a uniform appearance for all the properties included in the association’s zone.

The HOA management will typically provide additional services for its members in exchange for their HOA fees. These amenities are available to all HOA members and may include:

• Landscaping
• Parking lots
• Swimming pools
• Tennis courts
• Party spaces
• Snow removal
• Some HOA fees may also cover the cost of trash collection and certain utilities.

HOAs are symbolic of self-governance and democracy for certain individuals. This belief may stem from the idea that the best people to manage a community are those who live in it rather than a landlord who doesn’t reside on the premises.

Disadvantages

One disadvantage of an HOA is the high cost of the association fees. This can act as a deterrent for some prospective buyers. The HOA rules and regulations can also seem unreasonable, arbitrary, or too restrictive for some homeowners who may want the freedom to customize their properties.

HOA board members are normally volunteers and they may not be properly trained to manage real estate, deal with complex financial issues, or unite a disparate group of people for a common cause. The leadership of HOAs must reach a consensus when they're making decisions about maintenance and upgrades so it's also possible that there may be conflicts among HOA members who disagree. Source

DRE ID # 01769353

NMLS ID # 394275

What is a Starter Home?

 

 

A starter home is a home that acts as an entry point into homeownership for renters and other first-time home buyers. By definition, starter homes sell for less than the area median home sale price and may lack the features and amenities of other MLS-listed homes.

Starter homes have less space, fewer bedrooms, and fewer upgrades than “forever homes.” This is part of what makes them popular. Starter homes allow aspiring homeowners to stop renting, start building home equity, and begin benefitting from the responsibilities of homeownership. Homeowners often sell their starter homes and use their accumulated home equity as a down payment toward a larger, more expensive home within 7 years of purchase.

The most common reasons for trading up from a starter home include:

• Getting married
• Expanding a family
• Earning a higher income
• Selling a starter home may also come with tax breaks.

In the March 2024 State of the Union Address, President Biden announced a plan to award $10,000 in federal income tax credits to sellers who live in their starter homes and sell to a buyer who plans to make the home their primary residence. The sale price of a starter home may not exceed the county’s median home sale price to qualify it as a starter home. Property types can include single-family homes, condominiums, multi-family homes, and manufactured homes.

What should I look for in a starter home?

A good starter home meets your immediate needs, is within your monthly budget, and is located in an area that is expected to appreciate.

How long do people typically stay in a starter home?

Life moves at different paces for everyone, but it’s common for first-time buyers to stay in their starter homes for 5-7 years.

Can a starter home be a good investment?

Yes, a starter home can be a good investment. Buying in the right location and making smart improvements can increase the home’s value, and provide substantial home equity when you decide to sell.  Source

DRE ID # 01769353

NMLS ID # 394275