Tag: mortgage tips

Mortgage Loan Options When Buying a Fixer-Upper

Posted on | by Ethan Taub
Interior designer showing wood swatches to his customer, laptop, tools and house projects on desktop top view

A fixer-upper may need extensive renovations before you’re able to move in. A  standard mortgage doesn’t cover this type of situation. Thankfully, there are two types of mortgage loan options that combine the mortgage with a renovation loan, so you don’t have to put in multiple applications for this process. When you shop mortgage lenders, you can use the renovation loans for your ideal setup.

Mortgage Loans For a Fixer-Upper

There are two basic mortgage loan options. A standard mortgage loan covers the sale price of the home and the seller receives it in one portion. The home’s price is based on its appraised value and that of comparable properties surrounding it. The funding you receive only covers the cost of the home – it does not include any extra funding.

A renovation mortgage loan covers the cost of the home’s sale price and renovations. The loan consists of two parts. The first pays for the home’s sale price, much like a standard mortgage loan. The second portion is the amount for the renovation funding, and it sits in an escrow account. After the mortgage lender conducts a successful inspection of the renovation project by the mortgage lender, they send the money to the contractors doing the work.

The total loan amount that you get depends on the type of renovation mortgage you select, the scope of your work, and the completed appraised value of your home following all planned renovations.

FHA 203(k)

The Federal Housing Administration offers a government-backed renovation loan called the FHA 203(k). The financial institution that offers the loan also issues it, but the FHA insures it in the event that a borrower defaults on the loan. This allows lenders to have a higher risk tolerance and be willing to work with people who have credit profiles or income that are not generally ideal for a conventional mortgage loan.

This mortgage loan option is available as a standard and streamlined option and covers renovations that are cosmetic in scope, or structural. Luxury renovations are not supported by this loan, although the definition of luxury may be dependent on the lender that you’re working with and whether you have the same things in mind when you think about luxury products. A streamlined FHA 203(k) is for renovations that will total $35,000 or less.

These renovations must not include structural work. The advantage of the streamlined loan is that it’s great for getting a renovation mortgage loan quickly that can cover many cosmetic concerns. A standard loan requires more documentation, but it allows you to add in major structural work and is for projects that will exceed the $35,000 limit. The minimum amount of rehabilitation is $5,000 and the house has to be at least a year old. So you need to keep all this in mind when you look at mortgage loan options.

Some Requirements for the FHA 203(K) Loan

For the FHA 203(k) loan, you must be using it as a primary residence. If you have a 10 percent downpayment, some lenders may be willing to work with credit scores as low as 500. However, 580 is the necessary credit score for access to 3.5 percent downpayment options. Lenders may have higher requirements, and 620+ is a common number that they aim for. When you use the standard FHA 203(k) option, you need to work with a HUD consultant. They guide you through the contractor bidding process for the renovations, as well as acting as an overseer when it comes to the inspection process.

Fannie Mae HomeStyle

There are many mortgage loan options out there. The next we’re talking about is maybe not so familiar to you. The Fannie Mae HomeStyle loan has more flexibility on the type of homebuyers who can use it, as well as the renovations that you do to your home. Unlike the FHA 203(k) renovation mortgage, the HomeStyle mortgage allows primary residents, people buying second homes, and property investors to access this product. However, we can see the expanded access reflected through higher credit score requirements. The base requirement is 620 minimum for a credit score. Your downpayment is either 3 percent or 5 percent. You get access to a lower downpayment if the home is owner-occupied, it’s the first time you ever purchased a home, or you have a low to moderate-income level for the area.

You need to work with an inspector who will approve the renovation documentation by the contractor. And you can choose your own contractors and the renovation loan also covers associated administrative costs of these projects. If you’re unable to live in the home while it’s being worked on, you can have up to six months of payments on your mortgage covered in the loan amount so you have a place to live during the process.

Fannie Mae HomeStyle Utilization

The renovations that are allowed with this mortgage product include cosmetic, structural, and luxury. You have a lot more leeway to add high-end touches to your home, as long as they’re permanently affixed to the property. It’s designed more for people who want to upgrade the home they already live in or people who are looking for a good return on their investment or a vacation home. You can finance renovations that can cost as much as 75 percent of the appraised value of the completed home. You have to complete these renovations within a set time limit, which is typically one year from when you get the loan.

The maximum mortgage amount given from Fannie Mae is $484,350 on a single unit property. This amount may be adjusted for particularly high-cost areas, in which case it maxes out at $726,525.

Why Choose a Fixer-Upper

A fixer-upper is an excellent option for many home buyers who are not finding home inventory that meets their needs. Here are a few of the benefits of choosing a fixer-upper.

✓Save Money

If you have a tight home budget or you would like to live in a neighborhood that’s more expensive, a fixer-upper can be a good approach to getting the type of home in the location that you’re looking for. You’ll be able to get mortgage tips and find your way into a home that is affordable without needing to compromise on where it’s located at.

This benefit is particularly useful if you’re trying to get into a certain school district or you want to move closer to your work to lower the commute time. Sometimes in areas that become incredibly popular, going fo a fixer-upper is the only way to access a lower-priced home that’s in line with how much houses used to cost there. To really save money, looking into mortgage loan options is mandatory. So start on time and make sure you pay attention to details.

✓Putting in Sweat Equity

If you like taking on projects, using your handy skills to handle a whole house is an excellent way to express that and decrease how much you need to pay for a house. You get to bring your own preferences to the table and leverage your willingness to put work into your own home. You get a lot of satisfaction over checking off items on the to-do list, whether you want to take a DIY approach or you are working with contractors (or both!).

✓Reducing the Price Tag of Renovations

When a home seller renovates their home shortly before selling it, they’re going to try to maximize the income that they’re making off of those improvements. Because of this, you’re not just paying the base cost of the renovations. You’re also paying for the improved value of the home, as well as whatever profit the seller is attempting to put on top of that work. When you choose a fixer-upper to renovate, you are paying for the base pricing of the project without any of the overhead that ends up in the listing price. This also influences which of the mortgage loan options you choose.

✓Customize Everything

Cookie-cutter houses are enough to make me yawn, and that’s the case for a lot of people. You’re not a cookie-cutter human, so getting a fixer-upper and doing renovations on it is the perfect way to show off your unique style. When you have full creative control, you get to make the housework for your lifestyle and family. Make the perfect room flow, divvy up the space in the way that makes the most sense, and put in the touches that make you happy to walk into your home.

Apartment before and after restoration.

✓Paying Less Property Tax

When you make a home purchase, the property tax that you’re responsible for calculated by looking at the home’s sale price. While it will probably be re-appraised down the road, in the meantime, you could be saving thousands of dollars per year on taxes.

✓Less Competition

Many home buyers want something that’s move-in ready and newer. They don’t want to mess around with renovations or trying to imagine what the house would look like with changes. They just want to make a straightforward purchase and are willing to pay extra for the convenience. These houses get a lot of competition in many areas, but the fixer-upper is not. You end up being at a better place when you’re negotiating with the seller, which can lead to many perks in the process.

✓Make Your Home Worth More

Want to sell your home eventually? Improving a fixer-upper means that you’re going to get back a lot more than you paid. This is especially true when you’re in a hot neighborhood and you got in there by buying the cheapest house on the best block. So keep in mind that whichever of the mortgage loan options you choose, you may, ultimately, get your investment back and earn money.

✓Choose Where You Allocated Your Resources

A chef’s kitchen doesn’t make a lot of sense for a couple that primarily eats out at restaurants. You can choose exactly where your renovation resources are going. So that you get the best features in the areas that you care about the most. This creates a home that is uniquely suited to your needs in the short and long-term.

Considerations Before Buying a Fixer-Upper

A fixer-upper is an excellent option for many home markets. But there are a few considerations you want to keep in mind so you can avoid mistakes in the process of buying house and renovation.

Can You Deal With Months of Renovations?

In the big picture, you deal with renovations for a short period of your life. Then you can go on to enjoy a great customized home. However, that’s little comfort in the event that the renovations get in the way of your daily life. If you are buying a home that requires top to bottom renovations and there’s no untouched part of the house, you may want to consider adding rental or mortgage funding into mortgage loan options you look into, while you wait for renovations to complete.

Home renovation Cost Estimator by House Size.

Are You Able to Deal With Cost Overruns and Schedule Changes?

A home renovation includes a lot of moving parts, and they don’t always work together properly. There are many reasons that a renovation project can get behind schedule, or go over budget.  You need to be ready for things to not go as smoothly as you’d like. And be able to roll with the punches. If that level of uncertainty is stressful, then you may want to consider a move-in ready house instead

Do You and Your Family Members Agree on The Scope of The Renovation?

You don’t want to take out a renovation mortgage loan and then find out that people in your family are upset because you didn’t add in the renovations that they like. It might be hard to come to a consensus on each aspect of the project. But make sure that everyone is on the same page. And willing to make compromises to make the best possible house for everyone involved

Think about the short and long-term when you are putting together a renovation plan. Your kids may be fine sharing rooms today, but are they going to feel the same way when they’re teenagers? What happens to the playroom as a family gets older? Do you have hobbies that are shoved in a corner because there is no dedicated space? What type of storage solutions will be necessary for a new property? Consider all of these questions so that you’re not overlooking anything major during this process.

In Conclusion

Fixer-upper mortgage loan options are a perfect solution for many home buyers. There are mortgage products that support both mortgage and renovation funding. You can consult a mortgage broker who can offer you various options from different lenders.

Get yourself in the home of your dreams. If you’re making major structural changes to the property, spend some time observing how you use your current home. The flow from room to room, and areas that you would like to improve. You don’t want to go through the trouble of restructuring a house just to have the flow end up being completely opposite of the ideal for your family. Use the help of a HomeStyle or FHA 203(k) renovation mortgage loan option!

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How to Find A No Income Verification Mortgage Loan?

Posted on | by Carlie Lawson

You have reached that time in life where you feel ready to settle down and live the homeowner’s life. So you want a house. And you want to decorate it. You keep seeing those Wayfair commercials and thinking, “Hey, I have just the place for that.” Then, you realize you do not. Actually, you live in a tiny apartment. Or a mobile home. Or an RV. Maybe, you still live with your mom and dad. Bummer. Uh oh.

How to Find a No Income Verification Mortgage Loan

You just got a notion to search for mortgage requirements. You found out how hard it can be to qualify. What is that income check thing?

When you apply for a standard mortgage, you learn that the lending institution will not only check your credit, it will check your income. You must have verifiable income at an appropriate level for them to approve you.

That means you must provide your pay stubs, your employer’s name, phone number and address, your W-2s, your tax returns plus copies of your bank statements. The lending institution may contact them via mail, email or phone to verify your income. This applies to both a mortgage for the initial purchase and a refinancing loan.

So, what does one do if you happen to be self-employed? What if you own your own business?
You can apply for a no income verification mortgage although this cuts into your interest rate shopping. That does not mean you can have no income. It is handy though in several valid situations.

Who Can Use a No Income Verification Mortgage?

While many individuals may find this handy, a few common scenarios exist. You might want to read on if any of these situations apply to you.

  • You invest in real estate and carry over passive losses. These eradicate your earnings on paper although you have proven cash flow.
  • You work on commission and your income varies vastly from month to month.
  • You own your own business and pay yourself, but without a formal paycheck or you are a sole proprietor.

No Income Verification Mortgage Qualifications

Very simply, you qualify for a no income verification mortgage. It requires you to still provide documentation of your income, but a different set of documents than a standard mortgage. You need to have an IRS 1099 or be retired, but with a steady income.

Some organizations, like Mortgage Depot, offer a no income check program. To qualify, you must deposit a 25 percent down payment for the total cost of the purchase transaction and obtain 65 percent Loan to Value (LTV) financing for refinancing. Other requirements exist, but that is the monetary minimum. The Depot’s program is available in 46 states. While you must provide a significant outlay to qualify, you will NOT have to provide the following:

  • Tax returns,
  • W2’s,
  • Pay stubs

Through the program, you can qualify for loan amounts of up to $3 million on investment properties of one to four residential units or condos. In NY, you can use the loans for a primary residence. Other property options include multifamily and mixed-use properties of five units or more, as well as automotive service, office, retail, self-storage and warehouse space. There is no limit to how many properties you can own.

The Self-Employed Borrowers Program

You may not qualify for the no income verification mortgage, but you may qualify for its separate Self-employed Borrowers’ program. This is a different program. If you are self-employed and did not meet the occupancy requirements of the Mortgage Depot No Income Verification Mortgage program, you might qualify for the Self-employed Borrowers’ program. This uses bank statements to verify an individual’s business or personal deposits to calculate income and lets your occupancy include your primary residence.

This probably sounds odd since the lender still is verifying that you have income. These alternatives simply let you use a different form of income to prove you can pay back the loan. No institutions of finance will approve a loan without you proving that you can pay it back. These methods though do allow you to have the bank or credit union consider alternate income which can include the following:

  • Social Security benefits,
  • Pension funds,
  • Child support payments,
  • Funds from retirement account distributions,
  • Unemployment benefits,
  • Disability payments,
  • Employment offers for a future position that includes the salary and start date,
  • Housing/rental income,
  • Capital gains from investments,
  • Income from a spouse or partner,
  • Trust income,
  • Savings or cash,
  • VA benefits,
  • A government annuity

Potential Lender Requirements

Your lending institution may require a few various items before agreeing to extend a loan to you if you do not have a typical income source. These items range from setting up automated payments to a co-signer.

Automatic payments

You would need to set up automated payments so your monthly amount due was deducted on the same date each month from your bank account. This ensures you consistently pay in full and on time.

Security

You might need to provide collateral such as a paid in full vehicle or another property. It is usually easier for a person to obtain a secured loan than any other type.

Cosigner

A cosigner is a third-party individual who applies for the loan with you. If you purchased a new car when you were a teenager, you probably already took out a loan once that used a cosigner. If you fail to pay your loan payments on time, the bank will contact your cosigner for the funds.

Your Credit Is Very Important When Getting a No Income Check Mortgage

Your credit history and credit score still matter. Besides your raw score, any bank will consider your debt repayment consistency and your credit utilization. So, what if you do have less than perfect credit? That is when you have to take a few months – at least six – to improve your score first. Improving your credit is one of the most important mortgage tips to follow.

While you have many ways to check your credit, going to Creditry lets you check your credit, then monitor it, too. You can learn to better manage your credit by using its blog. You can learn important things like:

  • How to organize your payment due dates,
  • How to request to move a due date,
  • Calculating your credit-to-debt ratio,
  • The impact of opening or closing a credit line on your credit score

You need to learn those things so you can better manage your credit and build a strong financial history. You also need to check your credit so you know your FICO score. If it is above 679, you need not worry. Credit scores range from 350 to 850 (or 900, depending on the credit bureau). A 680 places you in the good range. If you have a score that places you in the good, very good or exceptional range, you should have an easy time obtaining a loan although you have retirement, variable or unearned income as the source or sources for your monthly payments.

Credit score scale
Improve Your Credit Score Fast

You can also very quickly boost your credit score by altering your credit utilization. When you try to obtain a no income verification mortgage, you will find your credit score means even more. This is the toughest type of mortgage to get. If you can quickly pay off some of your existing debt, you can up your score quickly. Your credit utilization score refers to the total amount of credit you have available versus how much you are using. This comprises 30 percent of your credit score. If you pay down your balances but keep the accounts open, then you can quickly increase your score.

Things that makes up your credit score

No Income Verification Mortgages Rarer Now

Today it is even harder to qualify for because of the rarity of these loans. This type of mortgage became wildly popular in the early 2000s. While they did help the tiny percentage of individuals with high incomes that could be tough to document, lenders started misusing them for their gain. They began extending the loans to subprime borrowers around the time the housing bubble developed. That made for twice the problem for the financial industry.

It got worse. As lenders continued to extend loans to subprime borrowers, without reliable income, the problem grew. Then those who outright did not qualify began to apply. They knew they did meet the qualifications and they lied on their loan applications to get approved. No income verification mortgages began to get the name “liar loans”. The name liar loans became most applicable in expensive markets where mortgage approvals were extremely rare for all but prime borrowers. The subprime borrowers could not afford the homes for which they applied for mortgages and they defaulted on the loans.

About 2005, the finance industry revamped its low- and no-income verification loans, deciding to try to save themselves by offering more loans. They loosened the requirements which at least meant people no longer had to lie on the applications, but the subprime lenders dropped the qualifications too low in exchange for a higher interest rate. During the period from 2000 to 2007, no income verification mortgage loans more than quadrupled. In those seven years, the loans rose from two percent of home loans to nine percent.
Here’s the deal. Banks and those employed by them have incentives to make loans. Those incentives tipped the scales to them offering too many to people who should not have them. The main reasons are:

  1. Loan officers earn a commission on every loan. It does not matter if the homebuyer defaults on the loan or not. The loan officer still gets paid.
  2. Mortgage lenders planned to re-package the loans and sell them to investors as mortgage-backed securities.
  3. The bank itself makes money on the loan origination fees, so the volume of loans makes them money automatically. Bad or good loan, as long as it went through the system, the bank got paid.

All of the mistakes accumulated and in 2008, the boom went bust, and the banking/financial crisis occurred. According to The Financial Crisis Inquiry Report, by the time the crisis came to a head, investors held more than $2 trillion of the repackaged mortgage-backed securities. They also had invested in about $700 billion of collateralized debt obligations which included mortgage-backed securities.
Delinquencies and defaults occurred the most in what real estate calls sand states – the states of Arizona, California, Florida, and Nevada. Real estate’s expense in these desirable locations caused serious delinquencies – those where payments are late by more than 90 days. That accounted for 13.6 percent of sand state mortgages. Compare that to 8.7 percent nationally.

The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 created a rule set that lenders must meet to end the bad decision-making. It included an “Ability-to-Repay” rule that requires the mortgage lending institutions to confirm each borrower can repay the loan before offering it.

The history lesson comes so you understand just how tough it will be to qualify for one of these mortgages, especially if you live in a sand state. The only loans to which the Dodd-Frank did not apply were those for loan modifications timeshares, reverse mortgages, and temporary bridge loans.

No Income Verification Mortgages Today

A select number of financial lending institutions still offer no income verification mortgages but now the government mandates the qualifications for obtaining one of these loans. The required credit scores range significantly higher and these types of loans come at great expense to the consumer. You will need a score of “very good” or “excellent” to qualify now. This type of mortgage still comes with a higher interest rate than a typical mortgage. The updated law does not apply to business and commercial mortgage purchases.

Final Thoughts

You could purchase a home as a business investment to qualify for a no income verification mortgage. You also could apply for a generic type of personal loan. Loanry provides various educational tools to determine which loan type works best for you. You can complete a small form to get started and it will suggest for you the best loan solution(s). You may get an email of suggestions or you may get automatically forwarded to a lender that offers loans to individuals with your credit history.

Loanry

Mortgage Broker Fees Explained: Home Loans 101

Posted on | by Kevin Strauss | Leave a Comment on Mortgage Broker Fees Explained: Home Loans 101

Shopping around for a house mortgage is an important step of the process. However, many people don’t have time to contact different lenders and look at all the little details so they choose to go with a mortgage broker instead. Before you decide to go with a mortgage broker, you should understand how mortgage broker fees work so you can make sure it’s the right decision for you.

How Do Mortgage Broker Fees Work?

Unlike a loan offer, a mortgage broker doesn’t work for a bank. Brokers are independent and must have a license. They will charge a fee for their service, which can be paid by you as the borrower or the lender. The fee will usually be a small percentage of the loan, which varies between 1% and 2%. If you are paying these fees, the dollar amount can be paid upfront or added into the loan. Mortgage brokers will need to disclose fees/ upfront and only charge what is disclosed. Every fee should be itemized and the mortgage broker will need to tell you exactly why each fee is being charged. Fee costs will vary depending on the number and size of the loans.

The Dodd-Frank Act put in new regulations on how mortgage brokers get paid and how the fees work. Prior to this, lenders could compensate brokers if the brokers could get their clients to agree to high interest rate loans and then sign off on the fees. There were few laws in place in order to protect clients. As a result of this, there is more protection for clients.

Now mortgage brokers can’t charge hidden fees, can’t tie the pay to your loans’ interest rate, can’t get paid for steering you in the direction of an affiliated business, and can’t be paid by both you and the lender. Unless you pay the cost upfront, mortgage brokers will generally not receive payment unless there is a closed deal.

What Does a Mortgage Broker Do?

When you go to the bank to get a loan, the bank offers you only the loans they carry. Since it’s only one institution, the loan options can be limited and may not suit your needs.

If you go to a mortgage broker, he or she can have a variety of loan options from various lenders. It’s the mortgage broker’s job to find the best mortgage rate tailored to you and this is why they charge mortgage broker fees. For example, if you need to get a house but can’t afford more than 5% down payment then your mortgage broker should approach lenders that have those terms.

Lender Paid Compensation

With a lender paid fee, a broker will connect a homebuyer to a mortgage lender and then the lender will pay the broker. Brokers can receive different compensation from different lenders. For a homebuyer, this structure can work out because they don’t have to pay for the broker when the deal is closed. However, you will still cover the commission indirectly, usually by paying a higher interest rate.

A drawback to this payment structure is that brokers can be biased by the compensation given by different lenders. A responsible broker should be offering the most affordable option, regardless of the commission they are getting paid. Unfortunately, not all brokers can be so honest and if the broker is going to prioritize their own profit then the homebuyer can end up paying a lot more than what is needed.

Borrower Paid Compensation

When a mortgage broker users a borrower paid fee schedule, the homebuyer pays for the broker’s services when they close on the loan. This payment will come in the form of an origination fee. The fee will vary based on your state of residence, your broker, the complexity and size of the loan, the housing market, fee caps, and more.

Borrower compensation also isn’t always in the form of origination fees and can just be another miscellaneous fee. Even if the borrower is paying this fee, it’s still advantageous to borrowers since it will remove the broker’s temptation to choose a more expensive lender who gives them higher compensation. The broker is more motivated to choose an affordable lender since they will be paid the same.

Which Mortgage Broker Fee Structure Is Right for You?

Regardless of the compensation structure, you will end up paying the broker’s fees in one way or another. The right fee structure for you will depend on whether you want to make the payment over the course of the loan or upfront. If you are able to have the money upfront then a borrower paid compensation option can be your best bet. This way you can avoid inflating your loan payments. You also won’t have to worry about whether or not the recommendations were just influenced by the broker’s desire for higher compensation.

Fee schedules can vary by different brokers. If you want to get a good deal, you will have to comparison shop. Be sure to look at the whole picture, including other lender fees and the interest rate for the best overall value. Brokers will not usually have a salary or any base pay. Brokers get paid by commission. If you see a broker advertising a no-cost loan, this should make you suspicious. Ask how a broker is being compensated if they aren’t disclosing that information to you.

Do You Need a Mortgage Broker?

Since there are mortgage broker fees, you may be wondering if you actually need the services of a mortgage broker. There are pros and cons to using their services but it’s helpful to know that mortgages can be complicated and it can be difficult to actually crunch all the numbers yourself.

Pros of Working with a Mortgage Broker

Brokers will give you all of your options. Many homebuyers just choose a loan from the bank where they already have a checking account but it helps to know all your loan options from a variety of lenders. Shopping around is the key to finding the best deal and a broker can deliver a more ideal loan than one bank ever could. Brokers are able to save you time. While it’s possible to compare all your options on your own, it can be time-consuming.

Brokers can handle all the negotiations with the lenders and many have relationships with certain banks that allow you to speed up the process. If you are in a rush then using a broker can help. Brokers will give you specialized attention and factor in your specific characteristics to match your application to the best lender for your circumstances. This can be helpful if you are an abnormal candidate but it can also help even if you do have good credit.

Cons of Working with a Mortgage Broker

No matter where you get the loan from, there will be fees. These can be in the form of appraisal fees, origination fees, and application fees. Some mortgage brokers can get some of the fees waived. However, brokers still charge their own mortgage broker fees. Mortgage broker fees are usually paid by you but in some cases can be paid by the lender. Whether it is added to the loan or paid upfront, it can still be a chunk of change. You need to know what your mortgage broker is charging you and weigh it against the benefits.

Mortgage brokers are independent from banks but they can still have biases. Some brokers can have a long history of dealing with a certain lender and favor them. In some cases, the lender may pay the mortgage broker fee, which sounds great unless the loan has undesirable terms.

Different Mortgage Broker Fees

Mortgage brokers may have different ways of naming their fees. Here are some that you may find.

Loan Origination Fees

Some brokers will add their fees to the origination fees by the lender. If this is the case, you want to ask for a breakdown. Loan origination fees will be a percentage of the loan.

Yield Spread Premium

This is a fee that lenders pay brokers for getting the client to agree on an interest that is higher than the going market rate. If you are going to choose this deal with your broker then check to see if the interest rate is competitive. If the broker is not charging you this fee then someone is paying this fee.

Upfront Fees

This fee will usually be charged if a borrower is looking for a jumbo loan. They are typically charged as a flat fee for setting up the loan. If the broker isn’t charging this fee then check to make sure the broker isn’t getting a yield spread premium from the lender.

Administration Fees

In some cases, a mortgage broker will add administrative fees to the standard fee. If you see these fees on your agreement, ask to have them be waived. Unless you are at high risk due to your credit profile, you can usually negotiate your way out of these types of fees.

How Do You Find a Mortgage Broker?

Mortgage broker fees are important but it should only be one factor when you are shopping for a broker.

The best way to find a broker is by asking relatives and friends for referrals and make sure they have actually used the mortgage broker. Learn what you can about the services, communication style, and approach to clients to make sure it’s the right fit for you. You can also ask your real estate agent. Some real estate companies do have an in-house mortgage broker as part of their service but you don’t need to be obligated to go with that individual or company.

There are some different questions you can ask. Ask how the application process works. One of the main reasons for using a broker is to make the home buying process easier. The best mortgage brokers can provide information on the mortgage application process, such as a comprehensive list of documents you need to complete an application. The broker should take into account your personal circumstances and ask questions about your situation so they can find the best solution. Find out how long the entire process will take. You want to know what to expect and if the broker can guarantee on-time closings. Check the track record of the broker. Does he or she have a good reputation? How long has he or she been in business? Read reviews and ask for references.

Mistakes You Should Avoid When Buying a House

There are a lot of mortgage tips out there but there are some mistakes you should avoid when getting a mortgage, whether you are a first-time buyer or looking to refinance.

Not Getting Pre-approved

Not shopping for a mortgage until you have already found your dream home can be a big mistake since you can be too late. Many sellers require a pre-approval notice be given with an offer and the process can take days or even weeks. It’s best to apply for pre-approval before you look at any available properties. When you do this extra step to prepare your finances, you are ready to submit an offer quickly when you find the perfect home.

Borrowing Your Max Amount

The pre-approval can help you figure out how much you can afford to spend. Many buyers believe that the amount on their pre-approval letter means that is the amount they can spend. Instead, it’s better to think of the loan amounts as a range. You may have the ability to borrow that much but you don’t necessarily want to go that far. It’s best to do some budgeting on your own. Look at your income and expenses in order to figure out how much you would be comfortable putting toward a mortgage each month. Use that number and play around with a mortgage calculator until you land on the price of how much home you should really be buying.

Overestimating Abilities

Buyers may be willing to take on remodeling and repairs in order to get a lower sale price. The repairs may require more money, time, and skills than buyers have. If you are looking at a fixer-upper property that will need a lot of care, make sure that you are honest about your abilities. Do you have previous remodeling experiences? Can you afford professional help? What will happen if there are unforeseen expenses and problems?

Not Reading the Fine Print

You should be reading everything you are signing in full. This is easier said than done so it’s easy to skip a section. This mistake can cost you a lot. When you are negotiating an offer, you need to know exactly what you are agreeing to before you sign. The mortgage broker fees are just one of the things you need to understand when getting a mortgage.

Not Getting an Inspection

Inspections are there for the buyer’s benefit and skipping inspections may not give you more bargaining power. If you choose to waive any inspections then you agree to take financial responsibility for any repairs that can come up, even if the problems pre-date your ownership. Weigh your options carefully if you decide to not get an inspection.

Forgetting About the Closing Costs

Budgeting to get a home isn’t just about what you can afford as the monthly mortgage payment and down payment. You also need to consider closing costs. Closings costs are paid at settlement and include the fees needed for the transaction. The exact amount you will pay at closing will depend on your property but it usually between 2% and 5% of the purchase price.

Conclusion

A mortgage broker can help you when it comes to where to shop for a mortgage and finding the best deal for your situation. Brokers do have mortgage broker fees that you will need to understand when it comes to getting the deal. Some of the time the lender pays mortgage broker fees and other times borrower pays these fees.

There are advantages and disadvantages of working with a mortgage broker that you will want to weigh out. You also want to make sure you are getting a broker that will give you the best deal and really help you with your application process. Whether or not you work with a broker, be sure to avoid some home buying mistakes and know the mortgage process in order to make sure it all goes smoothly.

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