Mortgage Preapproval vs. Prequalification: What's the Difference?

What Is a Mortgage Prequalification?

A mortgage prequalification is a quick estimate of how much home you can probably afford. (At least according to the lender—your actual home budget should be a separate conversation.)

Why is it a quick estimate? Because, honestly, you don’t need to do much to get one. All you need is your name, phone number, and some numbers (real or fake) that show your income, assets and debts. Give these to your lender over the phone, online or in person—and they’ll give you a prequalification on the spot.

When is the best time to get a mortgage prequalification?

First, decide if you’re ready to buy a home. If you are, get prequalified.

Yeah, it’s really that simple. Since a prequalification gives you a big picture idea of how much mortgage you would be approved for, the best time to get one is in the very beginning—when you’re reviewing your budget. Think of it as the first step in the mortgage process.

What do you need to get a mortgage prequalification?

Here’s the truth—you need a lender and that’s about it. As long as you have numbers in your head or on paper, you can get prequalified.

What Is a Mortgage Preapproval?

A mortgage preapproval is a step above a prequalification. It’s a thorough investigation of your income, assets, credit history, rental history and debts. It will give you a concrete idea of how much home you can afford—according to your lender. When you get preapproved, a lender verifies you’re employed, checks that you aren’t falsifying the facts, and makes sure you aren’t swimming in debt up to your eyeballs.

When is the best time to get a mortgage preapproval?

The same as with mortgage prequalification, the best time to get a mortgage preapproval is when you’re ready to start shopping for a house. In fact, we’re going to let you in on a little secret—you can skip prequalification and go straight for preapproval.

When you receive your preapproval, keep one important fact in mind: Your lender will likely approve you for way more money than you should consider spending on a home. Stick with these two guidelines and you’ll have a home you can truly afford, while you work toward bigger financial goals like saving for retirement or paying for your kids’ college:

1. You need to put at least 5–10% down (20% will help you avoid paying private mortgage insurace). So if you have $20,000 saved, you can afford the down payment on a $200,000 home.
2. Your payments on a 15-year mortgage should be no more than 25% of your take-home pay. You’ll pay thousands less in interest with a 15-year mortgage than you would with a 30-year mortgage—and you’ll be out of debt in half the time!

You’ll be tempted to look at more expensive homes, especially when you see how much your lender thinks you can afford. But a huge mortgage payment will ultimately make your home a curse, not the blessing it should be. Source

How to Perform a Roof Inspection

A routine roof check is an essential homeowner box to check. A damaged or leaking roof can cause a lot of problems and even make your A/C work overtime. Use these tips to inspect your roof safely. Your roof is one of the most important parts of your home. A well-maintained roof in good repair protects your home from water intrusion, which is why it’s so important to inspect your roof regularly. Use these tips for how to perform a roof inspection on your own time.

1. Look for Algae, Moss, or Piles of Leaves

If you have binoculars, you can begin your DIY roof checkup from the ground. Start by walking around your house and checking your roof for piles of leaves or other growth or debris, all of which can cause serious damage to a roof. They can trap moisture, which can seep into the sheathing below your shingles and even into the structural elements of the roof itself. You should clear these away immediately.

Moss is especially dangerous because it soaks up rainwater like a sponge. The moisture can cause the wooden structure underneath your roof to mold and decay, which can compromise the structural integrity of your roof.

So, how do you get rid of pesky moss? You can apply moss killer and brush the offending moss away with a broom or brush, especially if the infestation is new. When you have your roof re-shingled, consider buying moss- and algae-resistant shingles—they may be more expensive than the regular shingles, but they can keep moss away for the lifetime of the roof.

2. Look for Buckled or Curled Shingles

Hot air in your attic can cause your shingles to warp, buckle, or curl. (This is typically an issue with asphalt shingles.) Misshapen shingles can compromise the integrity of your roof, letting in water and causing poor ventilation, so they should be replaced. If more than one-third of your shingles are curling during your roof inspection and repair process, it’s time to re-shingle the entire roof.

3. Check for Damaged, Missing, or Old Shingles

Missing or damaged shingles can also let water seep through your roof. If you have wooden shingles or wood shake shingles, inspect them for signs of dry rot, either from the ground or from a ladder (don’t walk on a wooden shingle or shake roof). Asbestos, slate, or clay tile roofs can suffer from breakage, so look for cracked, chipped, broken, or altogether missing shingles. If you’re performing a metal roof inspection, check for signs of corrosion, rust, stress wrinkling, or other wear. If you have asphalt shingles, check for signs of wear as you clean your gutters. Asphalt contains gravel-like granules. As the shingles age, these granules will break free and find their way into your gutters. If you see a lot of asphalt granules in your gutters, check the roof carefully for damaged or missing shingles.

4. Inspect the Roof Up Close

If you can, get up on a ladder and perform your roof inspection up close. While you’re up there, look for damage to the flashings around the chimney, dormers, and vent pipes. (Flashings are the metal materials on your roof that redirect water.) Damaged or corroded flashings can let water into the interior structure of your roof and could contribute to rot in the structure of your roof and the walls of your home. If you see damage, you’ll probably need to replace the flashings.

5. Investigate Your Attic

If your home has an attic, it’s important to get in there and look for signs of water leakage through your roof, especially after heavy rain. Doing so can help you spot damage that may not have been visible from the ground or your ladder. While running through your roof check, inspect your rafters and the wooden interior of your roof for signs of moisture, mold, and rot. If you see any water damage, you may need to fix your leaking roof.

Your roof is your home’s first line of defense against the elements. Even if you can’t afford to have a professional roof contractor inspect your roof twice a year, you can safely and cautiously check it yourself for signs of damage and wear. Regular DIY roof inspections will also help you get to know your roof, so you’ll be able to recognize problems before they get too serious. Source

When to Refinance Your Mortgage

Refinancing a mortgage means paying off an existing loan and replacing it with a new one. There are many reasons why homeowners refinance:

• To obtain a lower interest rate and smaller monthly payments
• To shorten the term of their mortgage
• To convert from an adjustable-rate mortgage (ARM) to a fixed-rate mortgage, or vice versa
• To tap into home equity to raise money for a large purchase, to consolidate debt, or to deal with a financial emergency,

Since refinancing can cost between 5% and 7% of a loan's principal and—as with an original mortgage—requires an appraisal, a title search, and application fees, it's important to know when it's worthwhile and when it's better to wait.

When Should You Refinance?

Refinancing your mortgage is a big step. As such, there are several things you should consider before you sign the paperwork. Most borrowers consider mortgage rates they want to refinance. Locking in a lower rate is an important factor to consider when you want to refinance because it effectively lowers your payments. But it shouldn't be the only thing to focus on when you want to renew your mortgage.

Here are a few other factors to consider before you apply:

• Your home equity. Make sure you have equity available in your home. This is key if the value of your home drops below the value when you purchased it. It's also important to note that many lenders (especially conventional lenders) won't refinance your mortgage if you don't have enough equity in your home.
• Your credit history. You won't qualify for a refinance if your credit score doesn't meet the minimum requirements. Take the time to build up your credit score before you apply.
• Refinancing costs. If you have a mortgage, you'll know how much you paid in additional costs. As such, you'll have to pay these expenses again—usually a small percentage of the loan. Try to find ways to negotiate so you can reduce the costs.

Other points you'll want to note are your debt-to-income (DTI) ratio, the overall term of the refinance, and whether you qualify for refinance points to reduce the interest rate on the loan. Source

Understanding 5 Different Mortgage Loan Types

You're thinking about buying a home — but do you know which type of mortgage is best for you? Let's go over the pros and cons of conventional loans, jumbo loans and government-backed loans, as well as the difference between fixed rate and adjustable-rate mortgages, so you can determine the right mortgage option for you.

Here are the 5 most common types of mortgage loans (loan guidelines may vary from lender to lender);

1.) Conventional loans

There are two categories of conventional loans — conforming and non-conforming.

A conforming loan is the most common conventional loan. It meets the guidelines to be sold to Fannie Mae or Freddie Mac, two of the largest mortgage investors in the country. You’ll need a minimum credit score of 620 to take out this loan, and lenders typically prefer a maximum debt-to-income ratio of 43 percent. You’ll also need at least 3% down — but if you put less than 20% down keep in mind that you’ll need to pay for private mortgage insurance (PMI).

Pros: More common loan option

Cons: Limited to $766,550 in most areas

A non-conforming loan does not meet the guidelines of Fannie Mae or Freddie Mac. For this loan you can take out a loan with a lower credit score. The maximum debt-to-income ratio and minimum down payment that is required varies from lender to lender.

Pro: Typically no limits on loan size (loan guidelines will vary from lender to lender)

Con: Usually more expensive than a conforming loan

2.) Jumbo loans

A jumbo loan exceeds the loan-servicing limit that’s set by Fannie Mae and Freddie Mac, which is currently $766,550 for a single-family home in every state except for Hawaii and Alaska. There are also a few federally designated high-cost markets where the limit is $1.149M.

Pro: You only need to put 10%-15% down

Con: You’ll need a really good credit score for this loan, at least 740 or higher. You’ll also need a debt-to-income ratio that’s closer to 36% than the normal 43%

3.) Government backed loans

Government-backed loans are offset by the federal government or they’re subsidized. Applicants applying for one of these loans can usually obtain one from a private lender of their choice, depending on its size. Below are specific government-backed loans:

An FHA (Federal Housing Administration) loan can be used to buy a property of up to four units, as long as one of those will be your primary residence. This loan will also require a special FHA appraisal, which can be completed by an FHA-approved home appraiser.

Pro: This loan is easier to qualify for if you’re building credit or need to make a smaller down payment. FHA loans have more flexible credit guidelines where you only need to put 3.5% down.

Con: You’ll need to pay PMI, which adds more money to your monthly mortgage payment.

You’ll have to pay the 1.75% mortgage insurance premium up front, then an annual premium of 0.15% to 0.75%. You’ll have to pay this for the life of the loan, unless you have a down payment of 10% or more — then the PMI will be dropped after 11 years. 

A VA loan is a loan offered by the Department of Veterans Affairs that helps service members, veterans and their spouses purchase a home. The VA sets the terms for the loan qualification, not the lender. One of the biggest qualifications for this loan is serving a certain amount of time in active duty. You can find those qualifications and amount of time here.

Pro: You may not need a down payment, as long as the sale price doesn’t exceed the appraised value, so you also don’t need to pay PMI.

Con: Sometimes the interest rates are higher than a conventional loan, although there’s a chance that they could be negotiable; most borrowers also need to pay a VA loan funding fee (usually between 1 and 3% of the loan amount).

4.) Fixed-rate mortgage loans

For this type of mortgage, the interest rate won’t go up (or down), like it would with an adjustable-rate mortgage

Pro: Your rate won’t increase over the course of the loan (no matter how high rates get).

Con: If interest rates are high, payments may be higher than a comparable adjustable-rate mortgage.

5.) Adjustable-rate mortgage loans

Also referred to as an ARM, this adjustable mortgage type has an interest rate that fluctuates over the course of the loan. This type of loan is a little complicated and is different for everyone, so If you want to learn more about ARMs, there’s a lot of great info here.

Pro: Your mortgage interest rate can go down if interest rates go down.

Con: If interest rates increase, so will your mortgage payment. 

Source

DRE ID # 01769353

NMLS ID # 394275

Happy Fathers Day!

 

 

“Today we celebrate the fathers whose embrace is more than home. It’s the safest place we’ve ever known.”- Unknown

Wishing all the fathers a very Happy Fathers Day! Hope you know how special you are!

(916) 847-3090

margeate@workhomeloans.com

Renting vs. Buying a Home + Pros and Cons

Buying a home has long been part of the American dream, but homeownership isn’t for everyone. Sometimes, renting makes more sense and offers greater freedom. Have you been wondering about renting vs. buying? Choosing whether to invest in a home or pay rent is a big decision that depends on your finances, lifestyle, and personal goals. One isn’t inherently better than the other. Both require an income to afford housing payments unless you have enough money on hand for an all-cash purchase, but even then, you need to consider your overall financial picture. Renting and buying come with various degrees of maintenance responsibility and commitment. Whether renting or buying is right for you depends on your current situation and an honest look at where you think you’ll be years later.

Renting a Home 

Renting a home offers flexibility. There’ll typically be someone else to tend to maintenance issues. You’ll probably have predictable monthly expenses, so you can likely count on extra cash in your budget. However, many rentals require you to adhere to a list of community and individual unit rules (e.g., your landlord might not be flexible if you want to paint your bedroom bright pink).

When you rent, you’re not necessarily throwing money away (you have to pay to live somewhere, even if you buy), but you’re not building wealth either. Here are some pros and cons for renting a home;

Pros 

• Many people find immense benefits to renting. The following are reasons why you might want to rent your next house.
• Flexibility. You can probably move quickly if you need to (as long as you’re not in a lease or are willing to pay to break your lease)
• Predictable housing payment. Your housing costs (including utilities) may be consistent each month since you won’t have to factor in repairs and other expenses.
• Low maintenance. You’ll likely have a landlord or property manager who will handle major maintenance tasks (but be prepared to change your own lightbulbs or fix minor problems).
• No property taxes. The owner of your rental is responsible for paying taxes on the property.
• Less strict financial standards. Getting approved for a rental unit is often much easier than qualifying for a home mortgage.

Cons 

• Renting can seem like the best option if you don’t want to deal with surprise expenses or repairs, but there are some drawbacks.
• Rent increases. Landlords can raise your rent after your lease expires, especially in areas with high housing demand.
• Possibility of a property sale. The owner of your rental may decide to sell the property, especially during times of rising home values, leaving you looking for a new place to live.
• No tax benefits. You won’t get to claim homeowner deductions on your taxes.
• Limited personalization. When you rent, you usually can’t do what you want with the home (no building your dream kitchen or entertainer’s backyard, in most cases).

Owning a Home 

When you own your home, you get to make decisions about what to do with almost all aspects of your property (condos, townhouses, and other properties with homeowners associations may significantly limit your freedom). But you’re the one responsible when something goes wrong too. Purchasing your next house can provide pride of ownership—a place to truly call your own. However, picking up and leaving may be difficult if you change your mind, have a job transfer, or experience an emergency that uproots you.

Pros 

• Is owning a home right for you? There are benefits to purchasing, including the following.
• Sense of stability and community. Owning can offer more assurance that you’ll enjoy the fruits of a neighborhood for an extended period.
• Builds equity. Most real estate increases in value over time.
• It’s yours to improve. Decorate, renovate, and add on as your heart desires.
• Tax benefits. Homeowners can claim a mortgage interest deduction on their taxes.

Cons 

• Wondering what might not be in your best interest when it comes to owning a home? Here are some reasons you might want to give homeownership a second thought.
• Responsible for maintenance. As a homeowner, you’ll have to tend to all repairs (or hire someone) and bear the cost of all maintenance.
• Requires a sizeable financial commitment. You’ll have long-term expenses like property taxes and homeowners insurance, along with a hefty initial investment (including a down payment and loan closing costs).
• Property value may decrease. While most real estate increases in value, you might lose your equity in the property. Difficult to change your mind. It’s not easy to pick up and move if you change your mind about where you want to live or if life’s circumstances call you elsewhere. Still not sure if you should rent or buy? Ask yourself the following questions to help make the decision easier.
• How long do I plan to live in the area?
• What are my finances like?
• What is the state of the housing market?
• How does my job factor into this choice?
• What are the costs of renting vs. owning this particular property?

Source

How To Find Open Houses Near You

Attending an open house is a great way to check out a potential home in person to see if it lives up to your expectations. While the way we shop around for houses online has made huge improvements in recent years, sometimes nothing beats examining a property yourself.

What is an open house?

An open house is a scheduled event where a home that is listed for sale is opened to the public for viewing. This differs from a private showing, which is essentially the same thing but is only available to serious potential buyers rather than open to anyone driving by. At an open house, the homeowner or their listing agent welcomes potential home buyers into the house to look around the property. A real estate agent or REALTOR® may take potential buyers on a tour of the home or just allow them to wander and explore the home’s features themselves. The purpose of an open house is usually to attract potential buyers who may be interested in the property after seeing it. An open house can also be a great way for the seller or their real estate agent to get feedback on the home to get a better idea of what potential buyers might want improved or fixed on the property.

How to find open houses in your area

Interested in checking out some of the homes in your area? There are plenty of different ways to track down homes for sale near you that may be opening their doors to the public. Let’s take a look at a few strategies;

1. Search the internet

The internet is a fantastic resource for finding open houses in your neighborhood. Many real estate listing websites will not only show you homes for sale in your area, but also when you can come take a look at them in person, if possible. Simply searching “open houses in my area” will often find you exactly what you’re looking for. Virtual open houses and showings are also an online option that has grown significantly in popularity since the beginning of COVID-19. Many listing websites now offer virtual tours, which use a video or 3D model of a home to give you a detailed look at a property’s interior without actually ever stepping foot there.

2. Set app alerts

Speaking of finding open houses online, you can also do the same through an app on your phone. There are plenty of real estate apps out there that can not only show you homes for sale in your area, but also other valuable information like real estate trends in your neighborhood. Some apps may even offer you the ability to set up app alerts to be notified when there’s going to be an open house near you or near an area you’re looking to move.

3. Take advantage of social media

Social media is a great way to reach a large audience quickly and easily, so many sellers and real estate agents use it to show off homes to potential buyers or promote upcoming open houses. You can follow real estate agents or REALTORs® on social media for updates or seek out open houses yourself by searching “open house” and the name of your city on platforms such as Instagram or Facebook.

4. Work with a real estate agent

If you’re working with a real estate agent or REALTOR® to find your dream home, they can often help you find open houses as well. Your real estate agent is likely very knowledgeable about the area you’re looking to buy a home in and can potentially point you toward upcoming open houses they know of. Real estate agents and REALTORs® also have access to a multiple listing service (MLS), which is a database of all homes for sale in a given area. With MLS access paired with their local knowledge and experience, your real estate agent can likely find you open houses that way.

5. Look for yard signs

Sometimes to find an open house, all you have to do is look around. If you’re looking to buy a home in a fairly populated area, drive around and see if you can find any yard signs indicating a home is for sale. Most for-sale signs will have a number you can contact with any inquiries about the property. Though it requires taking the time to drive around, this method works well for buyers looking to find a house in a specific neighborhood.

6. Contact local real estate offices

Even if you aren’t working with a buyer’s agent yet, you can contact local real estate offices to ask what open houses they might have coming up. This also gives you a chance to talk to agents in your area and potentially get an idea of who you may want to work with when starting your home buying journey.

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NMLS ID 394275 | DRE ID 01769353