Tag Archive for: first-time homebuyer

Buy a Home Now, Refinance Later at Reduced Fees

January 16, 2024
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The real estate waiting game is no fun. But with today’s high-interest rate, some would-be buyers think it’s prudent to play if they want to secure the best homeownership deal. The problem with that is you miss out on homeownership opportunities today, including less competition and falling prices in many markets.

The thing is, once the high-interest rates of today’s market moderate, everyone who’s been sitting on the sidelines may very well flood into the market at once. Yes, that’s right: A lot of other potential homebuyers are taking the wait-and-see approach, just like you are. The likely outcome is that competition will return, and real estate prices may start heading north once again.

Thankfully, Preferred Rate has a solution to get you on the path to homeownership NOW while allowing you to take advantage of lower rates if they materialize in the near future. The Buy-Fi Program lets you buy a home now and then refinance later with reduced lender fees.  

Let’s dig into the details of this program.

The Advantages of Preferred Rate’s Buy-Fi Program 

Buy-Fi is a game-changing opportunity for potential homebuyers seeking confidence and flexibility in their purchasing decisions. It’s truly the best of both worlds.

Buy now with confidence

Preferred Rate’s Buy-Fi program lets potential homebuyers buy with confidence between November 1, 2023, and March 31, 2024, regardless of current high-interest rates, with the knowledge that they can refinance into a lower rate later for lower fees.

Flexible refinancing options

Participants in the Buy-Fi program can refinance their homes anytime before December 31, 2024. This allows them to capitalize on lower interest rates at any time before that date.

Reduced fees make it a no-brainer

Preferred Rate is committed to reducing the financial burden of refinancing by offering reduced closing costs. These include administrative, application, commitment, technology, processing, and underwriting fees. When you add all those up, that’s a lot of savings compared with another mortgage lender or financial institution!

How to Buy a Home Now, Refinance Later 

A few simple steps can help you get into a home now with the Buy-Fi program while taking advantage of lower interest rates that may be forthcoming. 

To secure your home purchase loan, you just have to do the following:

  • Start your homeownership journey by applying with Preferred Rate for the purchase of your new home.
  • Successfully close on your home loan, securing your foothold in the real estate market.
  • At that point, Preferred Rate will watch the interest rates for you. When they drop, we’ve got you covered!
  • You can refinance anytime before December 31, 2024, and we’ll reduce your lender fees.

The Buy-Fi program creates a stress-free homeownership experience without the hassle of waiting for higher interest rates to come down. The strategy to buy a home now and refinance later is a financially responsible way to invest in real estate. These reduced lender fees provide real-world benefits to you in the long run and allow you to start building equity sooner.

Plus, this flexible approach of refinancing when it’s right for you (up until December 31, 2024) allows you to dictate the timing while securing a more favorable interest rate. 

Some people think sitting on the sidelines puts them in the driver’s seat in this market. But really, doing your homework, getting creative, and pulling the trigger when the factors are right for you are what really put you in control of your financial future. 

Other Things to Consider

Here are a few other things to consider when considering this program.

The federal funds rate and its influence on real estate

Preferred Rate’s Buy-Fi program strategically aligns with market dynamics influenced by the federal funds rate. That’s the rate at which banks, credit unions, and other financial institutions lend one another money. This gives participants in the Buy-Fi program a competitive edge in the real estate market.

In other words, when these high-interest rates finally start moving down, we move to save you money!

A new way to save

An online savings account—not to mention a high-yield savings account—is great, but Preferred Rate’s Buy-Fi program positions itself as a modern alternative to the traditional savings account. 

With Buy-Fi, you save money on reduced closing costs on the refinance (via reduced mortgage lender fees). You also save on the lower interest rate after you refinance. And, of course, you can start building equity right away.

Get into the market while the competition is lower

Those high-interest rates do make the housing market more attractive in a few respects. They mean that competition is lower, meaning you’re less likely to get into a bidding war over the home of your dreams. Lower competition usually leads to lower prices as well. 

Waiting to Buy a Home Could Cost You 

Getting a mortgage from other financial institutions or a mortgage lender comes with fees, including closing costs. The extra money required can strain the homebuying process, and waiting for rates to drop may not necessarily mitigate all these costs. 

At the same time, putting the money that would go toward your home purchase into one of these high-yield savings accounts that compounds interest can be attractive. However, the opportunity cost of waiting for lower mortgage rates could lead to missed opportunities for homeownership, impacting your long-term financial goals.

That’s why Preferred Rate’s Buy-Fi program is here to help. By encouraging proactive decision-making, offering flexible refinancing options, and reducing closing costs, Preferred Rate hopes to pave the way for a smart and seamless homeownership experience. 

Don’t let the uncertainty of market conditions dictate your homeownership journey. Seize the opportunity with Buy-Fi, and start your journey today!

House Hunting: The Art of Timing and the Cost of Waiting

September 27, 2023
House for sale. A stunning real estate photograph of a suburban


When it comes to investments, a lot of folks say that timing is everything. Sounds good on paper, right? But let’s be real, when you’re thinking about making a big investment like buying a house, trying to time the market is like chasing a unicorn. Sure, we all wish for a world where both interest rates and house prices are in the basement, but that’s about as rare as a shooting star.

Remember the big housing price drop in 2007 during the Great Recession? Yeah, that was a rollercoaster. And then in 2020, the pandemic made home prices play hide and seek. But apart from those blips, it’s mostly been business as usual.

Of course, home prices have their ups and downs, driven by stuff like the overall economy, interest rates, and what’s happening in your neighborhood. Speaking of interest rates, those are like the secret sauce controlled by the Federal Reserve. They’re the only ones who really know what’s up with interest rates, and they sometimes have to do some last-minute tweaking.

But hey, no worries, right? You’re thinking of waiting it out until houses are raining from the sky, and interest rates are so low you’d think they’re on clearance.

But what if that never happens? What if mortgage rates decide to do a rocket launch to the moon instead? Housing inventory could become scarcer than Bigfoot sightings. And as for prices, well, they dance to the beat of their own drum.

Bottom line, market timing might sound good in theory, but while you’re waiting for the perfect alignment of stars, someone else might snatch your dream home.

The Waiting Game

Putting off a big money move like buying a home can make sense sometimes, like if you need to work on your credit, save up for a down payment, or build an emergency fund. But if you’re just twiddling your thumbs waiting for the stars to align in the housing market, it might be time to consider the cost of playing the waiting game.

In this world of rising inflation, the price tags on everything keep going up. Unfortunately, that can eat into your housing budget, leaving you with less cash to put down on your dream pad.

And remember, a home is like any other product on the shelf—it’s not immune to price hikes. While some markets have calmed down a bit in the past year, nobody can say for sure if that trend will stick around. The wild card here is interest rates. If they take a nosedive, demand could spike again, and the epic house bidding wars of 2021 might make a comeback. So, no guarantees of lower prices there.

On the flip side, if interest rates decide to climb, there might be less competition in the market, but those rates will gnaw away at your housing budget. They can even tack on extra bucks—sometimes hundreds—to your monthly mortgage payments.

Renting Costs

Now, let’s talk about your current housing situation. If you’re renting, you’re basically paying someone else’s mortgage (your landlord’s), and you’re probably dealing with annual rent hikes.

So far, this year has seen average rent increases of around 3.3%, according to NerdWallet. But in some places, like Hartford, Connecticut (7.3%), Buffalo, New York (6.3%), Chicago (6%), and Boston (5.8%), rent hikes are way steeper.

One of the perks of owning a home is that your monthly mortgage payment stays put if you’ve got a fixed-rate loan.

And here’s another nifty thing about mortgages: You can refinance them. It’s like giving yourself a safety net. You can buy a home now to cash in on lower prices and less competition, and then refinance whenever interest rates decide to play nice.

And trust us, interest rates will eventually behave. The real estate market operates in cycles, and this interest rate party won’t last forever. When it’ll end, though, is anyone’s guess.

Don’t forget, that homes tend to appreciate over time, even if they take a few price dips here and there. Just look at the median price of homes sold in July—it hit $406,700, according to the National Association of Realtors, and that’s with interest rates at 7.3%!

Ready to Make the Move?

So, if you’ve got your financial ducks in a row but you’re waiting for the perfect moment to buy a home, consider that the right time might be right now. You can always refinance down the road, and you don’t want to miss out on your dream home if rates or prices decide to do a moonwalk.

Got more questions? Click here to chat with a Preferred Rate Mortgage Advisor in your area. They can fill you in on your unique financial situation and what’s cooking in the housing market.

Seven Red Flags to Look for When Buying a Home

August 29, 2023
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It’s easy to get caught up in the fun of house hunting, but you also need to keep your eyes open for warning signs that the home you’re considering might not be a safe, sound, dependable dwelling. 

Thankfully, you can easily spot major red flags. You just have to know what to look for, have the right people on your side (hello, structural engineer, home inspector, real estate agents, and your trusted licensed pest inspector!), and go into your purchase with your eyes wide open.

So let’s peel back the curtain—and possibly some paint to see what’s behind it—and start identifying the biggest homebuyer red flags.

1. Foundation Problems

It goes without saying that the home’s foundation is one of the most important structures—and structural issues can be expensive. The biggest sign to watch for, experts say, is cracking. While smaller hairline cracks in the basement are indicative of cement settling, larger cracks are a red flag. They may signal structural problems that compromise the integrity of the home.

One way to spot cracks: Unfinished basements are a starting point. Here you’ll get a clearer picture of the home’s foundation.If the home doesn’t have a basement, door frames can also provide some clues. If the door doesn’t close and open squarely with its frame, take a closer look. Unfit doors can point to larger structural issues.

If you’re still in doubt, consider investing in a structural engineer to inspect the foundation.

2. Pest Problems

No one wants to deal with a pest problem. But some pests can do more than send shivers down your spine. Wood-destroying insects like termites can cause serious damage to the home—and the bill for fixing it could be four figures.

One way to spot pests: A termite inspection from a licensed pest inspector is the best way to ensure that there are no creepy crawlies. Some states don’t require a professional inspection before buying a home, but your lender might. Either way, it’s a good idea to get one.

If the initial report raises any suspicions about possible pests, think about doing a more thorough pest inspection. If anything comes up, you have the discretion to ask the seller to cover the costs.

3. Freshly Painted Walls

It’s not uncommon for a home seller to make sure their home looks its best. This may include fresh paint. But a patch of paint—inside or outside the home—is one of the notorious homebuyer red flags. This patch of paint can signal an attempt to cover up damage, potentially costing you big bucks to fix.

How to spot patches of paint: Do your own inspection during the walk-through or open house before buying a home. Take a step back and look at walls from a distance. If you notice some inconsistency to the paint, there might be something hiding behind it.

Next, take a flashlight and get closer to see if there is damage to the wall underneath, obvious patches, or water staining. Be sure to alert your real estate agent if you see anything. They will pass the information to the seller’s agent or note it for the home inspector. Be sure to take a look at both interior and exterior paint in all areas of the home.

4. Questionable Repairs

DIY projects can be fun, but sometimes an owner’s attempt to repair something can go wrong. The savvy shopper will look at an amateur project and see a red flag. Remember that property flippers sometimes put a premium on speed but may lack the experience needed to make certain repairs.

One way to spot bad workmanship: If something looks rushed or incomplete, chances are it is. Some of the more common “quick fixes” can be found in the home’s plumbing, carpentry, and electrical work. Keep an eye out for leaky faucets, toilets (listen for sounds as well), missing trim work, and uneven flooring. Looking at outlet covers, corners of countertops, and air vent covers can give you a clue as to other workmanship issues.

5. What’s That Smell?

When looking at a home, it’s not just a foul smell that’s a warning sign. Pleasant smells can be warning signs, too. It goes without saying that a bad odor can indicate an issue with the home, but a pleasant smell can be an attempt to cover up unfavorable odors—and bigger issues.

How to sniff out an issue: Look for clues of compensation. Did the seller put a deodorizer in every room? Are all the windows open despite the cold weather?

Although these don’t always point to an issue, they could be homebuyer red flags. So be sure to inquire about all smells, both good and bad.

6. Mold Problems

I’m sure we don’t have to tell you that mold is one of the bigger homebuyer red flags. Not only can it indicate issues with the home, such as a leak, but mold can pose a health risk to you and your family. As you might imagine, fixing mold-related issues is also expensive.

One way to spot mold: Mold can be tricky to find, though water stains can provide a lead. The most common areas for mold are basements, attics, windows, and ceilings—as well as obvious wet areas, such as a bathroom or under a sink. There are also mold tests that can make a definitive determination on the presence of molds. In the end, a professional inspection is your best defense against mold.

7. There Goes the Neighborhood

The first six red flags dealt with the home itself, but you also want to put the neighborhood under a magnifying glass. Survey the area’s condition and look for an excess of for-sale signs, foreclosures, or abandoned lots. These can be indicators of stagnant growth and under-performance—things you definitely don’t want. 

Other things to look for: Visit your prospective neighborhood at different times of the day (and night) to get a full snapshot of what it’s like. During these visits, take note of vehicle and foot traffic and other potential issues like noise. You can also search online databases for crime frequency and sex offenders, as well as learn about schools and amenities.

While some of these factors may not be an immediate hit to your wallet, they can have long-term effects on the equity on your home. And they will certainly weigh on your peace of mind. 

What to Do with What You Find

If you find problems while house hunting, it’s up to you whether you proceed with the sale, try to negotiate with the seller, or walk away. 

As you weigh those options, here are a few things to keep in mind:

As-is sales

Buying a home “as-is” is exactly how it sounds: You’re taking it as it stands, warts and all. The seller isn’t offering any warranties or guarantees regarding the home’s current condition, which puts the responsibility on you to get the home inspected and find any defects.

Even if you do find defects, the seller will not be covering their costs—you’ll simply have the knowledge that the defects exist. Buying a home as-is carries a higher level of risk, but these homes typically come with a lower price tag, so weigh the pros and cons. 

Visible issues

No home is perfect, even a newly constructed one. But there’s a difference between your everyday problems and, say, encountering a horrible smell or seeing visible water stains during the open house.

You’ll want to document the issues with photos or a video, and then contact a professional who can help assess them. You can also request permission from the seller to conduct mold or water damage tests for a more accurate understanding of the situation. It’s important to fully understand the scope of a problem before making any decision.

Problems on the inspection report

Your home inspector will find things. However, you need to understand the problem, how it can be solved, how much that might cost, and how long it may take. Be sure to ask your inspector follow-up questions, as well as their personal opinion on whether this is one of the major homebuyer red flags or something minor that can be addressed later. 

The Importance of Due Diligence

It’s no fun to think about inspecting paint or worrying about hairline cracks. But these little tasks—whether done by you or delegated to a professional—can save you time, money and, perhaps most importantly, your peace of mind! You want to know that, at the end of the day, your family lives in the best home you can provide.

Remember that some of these homebuyer red flags are bigger than others. Water stains may be inconvenient and expensive, but structural or electrical issues could pose a real danger. Knowing what warning signs to spot, when to call in the experts, and when to move on in the house-hunting process can not only save your wallet, but it might even save lives. 

Want more information about homebuying and financing? We’re here to help!

What You Need to Know About Cosigning for a Mortgage

August 17, 2023
Smiling daughter and mother shopping online with credit card on laptop

Sometimes, we get by with a little help from our friends…or family. 

There are many reasons someone may need help to qualify for a mortgage. They may just be starting out and haven’t established a good credit history yet. Or perhaps they’re just getting out of a tough financial situation that they’re turning around. 

When it comes to cosigning for a mortgage, the cosigner is essentially boosting the financial profile of the mortgage application, while signing up to share responsibility for the loan should the primary borrower stop making their monthly mortgage payments. 

Questions About Cosigning

Cosigning can be an amazing thing to do for someone, especially your children or other loved ones, but it comes with a lot of financial responsibility on your part. Before cosigning for a mortgage, you need to understand all the implications, risks, and potential consequences. 

Does cosigning for a mortgage affect my credit?

Cosigning for a mortgage loan impacts your credit. The loan will show up on your credit report, meaning that it will impact your debt-to-income (DTI) ratio and overall credit utilization. Additionally, any missed or late payments by the primary borrower will impact everyone’s credit score—the primary borrower’s and the cosigner’s. 

Now for the good news: If the primary borrower consistently makes their monthly mortgage payments on time, it can improve everyone’s credit score. It’ll all come down to the primary borrower and their ability and willingness to pay on time.

With this in mind, it is always a good idea to maintain an open and honest line of communication with the primary borrower. This ensures that mortgage payments are made on time and creates good credit for everyone.

Does a mortgage count as debt? 

A home loan is a form of debt. Cosigning for a mortgage means you’re assuming responsibility for the debt alongside the primary borrower.

As mentioned, the mortgage debt will factor into your debt-to-income ratio, which lenders analyze to determine your ability to manage additional credit. It’s important to consider the impact of this debt when applying for other loans or credit lines in the future.

What are the risks of cosigning a loan? 

It’s a cold, hard reality that if the primary borrower fails to make timely monthly mortgage payments or defaults on the loan, the responsibility for this debt will fall on the cosigner. This could lead to financial strain, credit score damage, and even potential legal action as the lender attempts to collect the outstanding debt.

Remember, too, that since your debt-to-income ratio will be affected by cosigning for a mortgage, your ability to obtain credit in the future may be impacted. This is why you should think long and hard not just about whether you feel that the primary borrower can consistently pay their home loan, but also about any large purchases or credit lines you may need in the future. 

Reduced borrowing capacity could really hurt you if, say, you’re looking to finance a new car, help out a child with a student loan, refinance your own home, or invest in a second property. 

Can a cosigner be removed from a mortgage? 

The option to remove a cosigner from a mortgage loan depends on several factors. In some cases, mortgage lenders may consider removing a cosigner if the primary borrower has made consistent monthly mortgage payments.

It’s not as easy as just removing the cosigner’s name from the loan, however. The primary borrower typically has to refinance the home loan, putting it in their name alone. This means the primary borrower will have to take interest rates, credit score requirements, debt to income ratio, and their current financial circumstances into account. In essence, they would have to be sure they’ve cleared up the reason they needed a cosigner in the first place.

Trusted mortgage lenders can help you understand the specific requirements and conditions for removing a cosigner from a home loan.

What happens if a cosigner doesn’t pay?

We know what happens if the primary borrower doesn’t pay: The mortgage lender will come looking for the cosigner. But what happens if the cosigner also doesn’t pay? 

When a cosigner fails to make the mortgage payments, the lender will typically pursue both the primary borrower and the cosigner for payment. If neither party fulfills the financial obligation, they can both be subject to legal action and collection efforts.

What’s the difference between a co-borrower and a cosigner? 

A cosigner is someone who agrees to assume responsibility for the loan if the primary borrower cannot meet their obligations. On the other hand, a co-borrower (or co-applicant) is equally responsible for repaying the loan and shares ownership of the property.

While a cosigner’s name may appear on the loan documents, a co-borrower has equal rights and responsibilities, along with a stake in the house. 

What else do I need to know before cosigning?

You need to give cosigning for a mortgage loan a lot of thought. Assess the primary borrower’s financial stability, including their income, employment history, and credit history.

If you’re willing to consider cosigning a mortgage loan for them, you probably know the potential primary borrower pretty well. Use this relationship to your advantage as you think about how responsible they are in general. Do they always do what they say they’re going to do? Are they quick to shirk blame? Do they go out of their way to rectify problems, or do they avoid them like the plague? 

You want to be confident that your credit score, borrowing ability, and—most of all—good name will not be ruined by cosigning for a mortgage.

Next, ensure that you can comfortably handle the financial responsibility of the mortgage payment in case the primary borrower is unable to fulfill their obligations.

Finally, consult with a knowledgeable mortgage advisor like Preferred Rate to gain a comprehensive understanding of the specific loan terms, interest rates and any mortgage insurance requirements associated with the home loan. 

Pros and Cons of Cosigning for a Mortgage

You’ve now got a lot of information about what it takes to cosign for a mortgage. But let’s weigh out the benefits and risks so you can really hone in on whether this is the right move for you. 

Pros

  • Cosigning can help a loved one achieve their dream of homeownership.
  • It allows the primary borrower to qualify for a mortgage they might not otherwise have been eligible for.
  • On-time payments can, over time, help improve both the primary borrower’s and the cosigner’s credit scores and credit history.

Cons

  • Cosigning for a mortgage comes with financial risks, including knocks to your credit score and being held responsible for the other party’s missed payments or default.
  • It can limit your borrowing capacity, as the cosigned mortgage becomes part of your debt-to-income ratio.
  • The relationship between the cosigner and the primary borrower may become strained if payment issues arise.

Taking the First Steps

Cosigning for a mortgage is a big decision and a long-term commitment. So you have to weigh the risks and benefits carefully, considering both your financial situation and the primary borrower’s ability to fulfill their obligations. Sit down and have an honest conversation with the primary borrower. Make sure you lay the foundation for a healthy, open, and communicative relationship going forward.

Once you’re ready, bring a professional like a Preferred Rate mortgage advisor into your corner to make sure cosigning for a mortgage aligns with your financial goals and responsibilities.

If you’re at that point now and want to get started, give us a call today. We’re always here to help.

Six Ways to Beat Inflation by Buying a Home

February 2, 2023
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High inflation is no fun. Though everyone pays the same higher prices, periods of rising inflation don’t have the same impact on all Americans. A person’s investment strategy—including real estate, investments in the stock market and S&P 500, and their retirement plan—can be a good inflation hedge. 

While inflation slowly chips away at your dollar’s buying power, putting those dollars into investments can allow that money to grow faster than the rate of inflation. One of the best ways to beat inflation in 2023 is by buying a home—and we’ll show you how.

1. Lock in Your Interest Rate Now

The Federal Reserve combats high inflation by raising interest rates, thereby making it harder—and more expensive—to borrow money. So far this hasn’t done a lot to curb spending, and the Federal Reserve has made it clear that it intends to keep raising rates. This means borrowers who wait may face even higher rates. 

2. Buy Before Inflation Rises Again

As we mentioned, the actions of the Federal Reserve haven’t done enough to bring inflation down. Is there a threat that inflation will continue to rise? Absolutely. If and when that does happen, everything will get more expensive—including homes. Higher home prices mean larger loans, down payments, and closing costs, since all three of these are based on a percentage of the home’s price. It’s the ultimate example of a rising tide (aka rising inflation) lifting all boats. 

3. Stop Renting

Do you know what else is likely to go up during periods of high inflation? Rent. Because it’s a cost, right? So there’s a good chance it’ll head north as landlords use these rent increases to beat their inflation. Buying a home is a long-term investment that can save money—money that is currently only helping your landlord. Excellent inflation hedge for them; no help for you. 

Real estate is a part of any good, diversified investment strategy. Plus, it can lock in your expenses for the long term. No more worrying about rent increases or lease renewals. 

4. Utilize Preferred Rate’s Interest Rate Hack

Want to shave a few figures off the current advertised interest rates? You can with Preferred Rate’s interest rate hack. We have programs that will allow you to decrease your interest rate for either the life of the loan or the first two years. This can save money, prevent higher interest rates from crushing your dreams of homeownership, and allow you to make a long-term investment in your financial future, all while you beat inflation.

5. Appreciate Depreciating Debt

When you buy a home, that asset tends to appreciate in value over time (minus a few ebbs and flows inherent in the market). You know what does the opposite? Debt. Debt actually depreciates in value with the rate of inflation. 

Think about it this way: You know those folks who are always saying, “In my day, you could buy a home for $44,000”? Well, they’re not lying. Years and decades from now your debt will be worth far less. Your monthly mortgage payment won’t change, but with the rate of inflation, it will be worth less than it’s worth today. At the same time, your home is likely to go up in value. That’s a win-win, especially if you were renting before. 

6. Supplement Your Income with an Investment Property

Some Americans have extra cash lying around, becoming vulnerable to inflation because of the current economic uncertainties. If cash is sitting in a savings account earning next to nothing, then this much is certain: Inflation has won, and you’re no further ahead. 

Some people thinking about how to beat inflation have realized that an investment property may be the way to go, as that long-term investment can produce supplemental income. Extra income is extra appreciated with price increases, making this a smart inflation hedge. 

Every investment carries risks and rewards, and in a market like this, conditions can change in either direction—becoming more or less favorable. However, many individuals feel empowered when they take action. 

Though we can’t control periods of high inflation, we can respond to them by setting ourselves up for the best possible outcome. For some, that inflation hedge strategy will include locking in their investment costs, mortgage interest rate, and debt now to stave off any further price increases.

Preferred Rate has seen many market cycles, and we’re well-versed on the impacts of inflation. An experienced mortgage advisor is happy to talk anytime to determine if buying a home is the right move for you right now. 

Disclaimer: Preferred Rate – Partnered with American Pacific Mortgage is not a licensed CPA or financial planner. We advise you to consult your tax or legal professional as needed in order to make the right decision for you. Equal Housing Lender, NMLS #1850.

© 2023 Preferred Rate – Partnered with American Pacific Mortgage Corporation (NMLS 1850). All information contained herein is for informational purposes only and, while every effort has been made to ensure accuracy, no guarantee is expressed or implied. Any programs shown do not demonstrate all options or pricing structures. Rates, terms, programs, and underwriting policies are subject to change without notice. This is not an offer to extend credit or a commitment to lend. All loans are subject to underwriting approval. Some products may not be available in all states, and restrictions apply. Equal Housing Opportunity.

Can I Qualify for a Mortgage With Student Loan Debt?

May 11, 2022
mortgage blog, student loan debt, graduation

Graduation season is here! For many college graduates, student loan debt can turn into long-term financial stress. Even years after graduation, student loan debt can keep people from realizing dreams of homeownership. Add the recent economic shifts and inflation, and buying a house right now might feel downright impossible. This article can help bring some good news and help you make a plan.

If you’re getting ready to buy a house for the first time, but you’re worried about how your student loan debt will affect your mortgage, keep reading. A steady job and a good handle on your monthly expenses will take you farther than you think, especially if you’re a first-time homeowner. 

One of the best moves you can make is to lock in your rate today by getting pre-approved, which we blogged about here.

How to Buy a House With Student Loan Debt

This article will explain how student loans affect your home loan eligibility and how to qualify for a mortgage. Specifically, how to apply for a mortgage and get a home loan while you’re still paying off your student debt. 

A great first step is to connect with a mortgage advisor. You’ll be able to get personalized advice about your situation and find out about custom mortgage options. Start here to find a local advisor.

Three Factors That Affect Your Eligibility When You Apply for a Mortgage

#1 Debt to Income Ratio (DTI)

Your debt-to-income ratio impacts your buying power the most. Lenders compare your gross monthly income against your monthly debt obligations to determine how much you can afford to borrow. A DTI ratio higher than 43% can make it difficult to qualify. But there are select options for borrowers with student loan debt.

#2 Credit Score

A good credit score will get you a better home loan and a lower mortgage rate. But there are also special programs available for first-time homebuyers who have a lower credit score.

It’s always a good idea to download a free copy of your credit report. This will allow you to fix any errors, dispute incorrect information, and know your credit score.

#3 Down Payment

A larger down payment can often lock in a better rate and a more affordable mortgage payment. Ask your mortgage advisor about using investment stocks, retirement funds, gift funds, or borrowing from other sources.

Related: How to FAST TRACK your mortgage pre-approval

Best Home Loan Options for Homebuyers With Student Loan Debt

Related: Does every mortgage need an escrow account?

How Debt-to-Income Ratios Affect a Mortgage Application

When you apply for a mortgage, your debt-to-income ratio directly impacts your eligibility, your rate, and your loan terms.

Why? Lenders compare your total monthly income with monthly debt repayments to determine how much you can afford. For this reason, it can be difficult to qualify if your monthly debt payments are higher than 40% of your pre-tax income.

This is where student loan payments make a significant impact.

Student loan payments are automatically included in your monthly debt balance, so they directly affect how much you can afford for a home loan. Since there are different student loan repayment programs, the structure of your specific student loan payment plan can make a big difference.

First, let’s look at how debt-to-income ratios are calculated. Then you can decide whether or not it’s a smart idea to restructure your student loan debt.

How to Calculate Your Debt-to-Income Ratio (DTI)

Figuring out your debt-to-income ratio (DTI) is easy.

First, write down your gross monthly income, then list all your recurring monthly payments.

Leave out expenses that vary each month, such as utility bills, entertainment, groceries, transportation, etc.

To calculate your DTI, combine your required monthly payments such as:

  •  Monthly rent or mortgage payment
  •  Student loan payment
  •  Minimum credit card payment
  •  Monthly car payment
  •  Any court-ordered payments (child support, back taxes, etc.)

Related: Boost your credit score in less than 60 days

Example: Calculating Your Debt-to-Income Ratio with Student Loans

For example, if your gross monthly income is $6,000, 43% would be $2,580. This is the maximum amount a lender would approve for a monthly mortgage payment for a conventional loan.

Next, it’s time to subtract your monthly debt repayments. For example:

  • Monthly car payment = $200
  • Credit card payment = $135
  • Student loan payment = $250

In this scenario, your monthly debt repayment would be $585. From the lender’s perspective, this means you have $1,995 available to make a monthly mortgage payment ($2,580 – $585 = $1,995.)

Note that your new monthly payment will need to cover your mortgage payment, homeowner’s insurance, property taxes, and mortgage insurance if required.

There are several loan options and custom mortgages available. Many home loans for first-time homebuyers offer home loans with 0-5% down. FHA loans only require a 3.5% down payment. Conventional 97 requires only a 3% down payment.

How Different Student Loan Repayment Programs Affect Your Mortgage Application

Finally, restructuring your student loans can help lower your debt-to-income ratio and be a better option than paying off your student loans.

Why? To apply for a mortgage, you’ll want to have a down payment ready as well as emergency funds. So you don’t want to deplete your savings to pay off your student loans.

If your monthly student loan payment is high, you might consider restructuring your student loan debt to lower your monthly payment. This will help lower your DTI.

Contact your student loan program and ask about the following options:

  •  standard repayment plan
  •  deferred student loan
  •  income-driven payment plan
  •  graduated payment plan

Don’t Let Student Loans Keep You From Buying a House

Buying your first home might be closer than you think, even while you’re paying off student loans. And several loan programs can work to your advantage, especially for first-time homebuyers.

Plan for your down payment, find out your credit score and calculate your debt-to-income ratio. Once you have a clear financial picture, you can consider restructuring your student debt to lower your DTI ratio.

Taking Action

Working with a local mortgage advisor can help you compare your best mortgage options, lock in the lowest mortgage rate, and secure the best home loan that fits your life goals. Even with student debt. Connect with a local mortgage advisor to discuss your options and save money on your mortgage. We’d love to help.

Why Title Insurance is a Good Idea for Every Homeowner

December 28, 2021
mortgage blog, title insurance, preferred rate

Homeownership is one of the biggest financial commitments that most people will ever make. You’ve probably heard of title insurance, but is it really necessary? If you are applying for a mortgage, your mortgage lender will most likely require title insurance. But even if it’s not required, title insurance offers clear benefits for new homeowners. 

Related: How to fast track your mortgage and get pre-approved for your best mortgage rate

Do I really need title insurance?

When you’re ready to buy a home, you’ll want to protect your investment in every way that you can. And if you have a mortgage, your mortgage lender will most likely require different types of insurance since your home is collateral for your loan. 

This is where title insurance comes in. Title companies verify the legal history of your home and make sure your new home has a clear title free from liens, outstanding debts, and public ownership claims.

During the transfer of ownership, you don’t want to be surprised by legal problems that show up, such as back taxes, ownership disputes, forged titles, or outstanding debt. 

Title insurance is specifically designed to protect both you and your mortgage lender from any disputes over the ownership of your new home. If a dispute does come up, the title company works on your behalf to clear the claims and verify home ownership. If there are fees during the process, the title company would be responsible for paying those fees.

Without title insurance, you’d need to face the battle on your own and pay any fees that could be required.  

What kind of policy is best for me and my home?

There are two primary types of title insurance policies: one policy for the mortgage lender and one policy for the homeowner.

When you apply for a mortgage to purchase your home, the mortgage lender will very likely require title insurance. This protects them from financial complications associated with any title disputes or other ownership complications. If you pay cash for a home or do not have a mortgage, then you will not be obligated to purchase a policy specifically for the mortgage lender. 

The title insurance policy for the homeowner protects you and anyone listed on the title or deed to the home. This policy is usually not mandatory but will protect you from legal and financial disputes. This is even true if the seller presents the warranty deed, confirming the title is clear. Despite this presumed protection, anything can happen.

Related: How to FAST TRACK your mortgage pre-approval

What are my coverage options for title insurance?

After purchasing your home, title insurance can offer protection against common disputes if any issues come up. These are common situations that a new policy covers:

  • Deeds that have been altered or forged 
  • Fraudulent claims 
  • Outstanding tax liens or other debts  
  • Encroachments or property line disputes 
  • Family members who may lay claim to claim the home 

Related: Does every mortgage need an escrow account?

How do I buy title insurance?

Your local mortgage advisor or real estate agent will most likely suggest a title insurance company. Since your local mortgage advisor works with thousands of home loans every year, it’s a wise move to follow their direction. That said, the choice is ultimately yours. Before you sign, you can always talk with your mortgage advisor about recommendations and research title companies.

Before offering you a policy, a title company will perform a title search, which is a process that searches for outstanding debts, loans, or ownership complications. This ensures that the seller has clear ownership of the title and has a right to sell the property. 

Once the title company has completed its research, it will offer a quote based on its findings. However, the title company may decline to offer a policy if the property is considered high risk. 

In the rare instance that title insurance is declined, your mortgage advisor can help you through the process and discuss your options. Your real estate agent is another partner that will be very helpful.

Is title insurance included in closing costs?

Typically, title companies charge 0.5% to 1% of the home’s final sale price, and it’s due at closing. However, this number can vary from state to state. Other risk factors could also influence the cost of the policy, such as the home’s age and the property’s legal history.

Total closing costs run anywhere from 2-5% of the home loan amount and typically include title insurance, appraisal fees, property taxes, loan origination fees, and other items.

If you’d rather not pay your closing costs out of pocket, schedule a time to talk with a local mortgage advisor about possible options

Related: How to roll your closing costs into your mortgage

Taking Action

When you’re ready to buy a home and apply for a mortgage, title insurance will keep you and your home protected. Getting pre-approved for a mortgage is the best first step you can take when you’re shopping for your next home. Connect with a local mortgage advisor to discuss your loan options and save money on your mortgage. We’d love to help.

How to Get a Fast Mortgage Pre-Approval

November 30, 2021
mortgage blog, mortgage pre-approval, preferred rate

Whether you’re getting ready to move up, move out of state, or buy a home for the first time, getting a mortgage pre-approval is the best move you can make in today’s housing market.

Mortgage rates dropped again with the news of the new covid variant, but they’re expected to rise again right along with inflation. Meanwhile, housing prices are still climbing, and homeowners are buying and selling amidst cash offers and bidding wars.

Getting a mortgage pre-approval sets you up for success no matter what kind of competition you face. With a mortgage pre-approval, you’ll know exactly how much you can afford. But more importantly, you’ll have the confidence that your loan is already approved! 

What’s the Difference? Getting a Mortgage Pre-approved vs. Pre-qualified

A mortgage pre-approval is way ahead of getting pre-qualified for a mortgage. When you get your mortgage pre-approved, your mortgage lender has approved your home loan amount. To do so, the lender has reviewed all required documentation such as income, debt-to-income ratio, credit report, employment, investments, and bank account statements. For this reason, your mortgage lender gives you a formal letter of approval. Once you have an offer, underwriting can fund the loan immediately.

A pre-qualification is simpler but you run the risk of getting your loan rejected. At its core, a pre-qualification tells all interested parties that you’ll most likely for a certain amount. With a pre-qualification, the mortgage lender only requires a few pieces of general information such as your income and a current credit report. Since they don’t run all the numbers, you face the possibility that your loan won’t fund when the time comes.

When you find your dream home, the last thing you want is to watch your loan fall through after you’ve made a competitive offer. Start here.

How to Fast Track Your Mortgage Pre-approval

When you decide to get pre-approved for a mortgage, the mortgage lender does the extra work to verify your income, credit, and the documentation required for a home loan. After your mortgage is pre-approved, you’ll receive a mortgage pre-approval letter to present with every offer. As a buyer, you’ll be confident knowing that your loan is approved up to the maximum amount designated. What’s more, realtors and sellers will know that you’re a serious buyer who can close fast.

An experienced mortgage advisor will discuss your loan options, financial goals, current mortgage rates, and your ideal budget. 

Step 1: Estimate how much you can afford.

Use a mortgage calculator to find out how much you can afford. The results will only be a ballpark figure, but it can help set expectations. Decide on your price range, then connect with a mortgage advisor to discuss your homeownership goals.

Check out this mortgage calculator to see how much you can afford

Step 2: Connect with a local mortgage advisor.

Talk with a mortgage advisor as soon as you’re thinking about getting a home loan. A local mortgage advisor will understand the unique challenges of the housing market in your specific area. An advisor can offer invaluable guidance regarding your loan options, and get your documentation moving quickly through to underwriting. A mortgage advisor is your greatest asset in the loan process, so be sure to work with someone who understands your goals. An advisor can start the mortgage pre-approval process right away while you start shopping for your next home.

Find a qualified mortgage expert in your local area

Step 3: Download your free credit report.

You can download a free credit report once every 12 months. It’s a good idea to find out your credit score and check the report to see if any errors need attention. Your credit score will have a direct impact on the terms of your loan and your mortgage rate. By getting a free copy of your credit report early, you can resolve any errors ahead of time.

Click here to download your free credit report

Step 4: Gather required documentation.

Ask your mortgage advisor for a quick list to help keep things on track. An experienced mortgage advisor will provide a checklist to follow and will make sure the process runs smoothly. Most mortgage lenders require similar documentation, with a few exceptions. Start gathering paperwork you’ll need to verify income and assets, employment information, bank statements, and tax returns.

  • Identification such as a passport or driver’s license
  • Employment verification
  • Proof of income (e.g., pay stubs, W-2 statements, bonuses, alimony)
  • Tax returns for the past two years 
  • Recent bank statements
  • Investment account statements

If you’re self-employed or plan to qualify using non-standard income, your advisor can talk with you about additional information that will be required.

Related: Boost your credit score in less than 60 days

Step 5: Take your mortgage pre-approval letter & make competitive offers.

Typically, a qualified borrower can get a mortgage pre-approval letter in just a few days. Depending on your situation, it might take a bit longer, which is why it’s wise to start early.

Connect with a local mortgage advisor so you can make sure all your documentation is in order. If you have good credit and verifiable income, getting pre-approved for a mortgage is a quick process.

If you have a financial situation that is less common, getting pre-approved for a mortgage is even more important, so you aren’t faced with holdups when you’re ready to make an offer. A qualified mortgage advisor can keep things moving quickly.

Once you’ve got your mortgage pre-approval letter, it’s time to make those offers!

Taking Action

Getting pre-approved for your next mortgage is the best first step you can take, especially in today’s housing market. We can help get your loan pre-approved so you know exactly how much you can afford and make a competitive offer. Connect with a local mortgage advisor to get started. We’d love to help.

Buying a Condo in 2022: Five Steps to Ownership

January 11, 2022
mortgage blog, buy a condo, 2022, preferred rate

Buying a condo in 2022 can be a smart move for first-time homebuyers and investors alike. Condos provide homeownership at a purchase price typically lower than single-family homes, along with a lot less maintenance.

For first-time homebuyers, buying a condo can put you on a faster path to homeownership, with an affordable mortgage and a low-maintenance property. For homeowners ready to invest in a second property, buying a condo in 2022 can help build wealth and financial security through rental income and home equity.

Want to buy a condo in 2022? This article can help you make the right moves.

5 Steps to Buying a Condo in 2022

Whether you’re a first-time homebuyer or a current homeowner thinking about investing in a second property, these five steps can help guide the process.

When you find your dream home, the last thing you want is to watch your loan fall through after you’ve made a competitive offer. Start here.

1. Decide if a condo will meet your financial goals and fit your lifestyle.

Buying a condo in 2022 could be a smart move to build financial security, but it’s worth thinking about balance and lifestyle. If this will be your primary residence, consider the benefits. Condos offer the opportunity to live in a close community with your neighbors along with shared amenities such as a pool, tennis courts or a fitness gym. In addition, condos provide a low-maintenance property while someone else maintains the landscaping and grounds.

On the other hand, if you love backyard entertaining or gardening, buying a condo might not be the best fit. Check with the HOA to determine what types of restrictions they may have. Many HOAs have regulations for overnight guests, pets, parking and more.

As an investor, are you ready to become a landlord? You can hire a property management company or manage the property yourself. Consider how you’ll manage ongoing maintenance and any issues that arise with tenants.

An experienced mortgage advisor can discuss your homeownership goals, current rates, and your ideal budget. 

2. Partner with an experienced realtor who knows the area.

Buying a condo in 2022 is different than buying a single-family home. Be sure to work with an experienced real estate agent who specializes in condominiums and townhouses. They will often have better advice and be a strong asset when you’re ready to make an offer.

A qualified real estate agent will know the resale values in the area and which condominium developments offer the best value in your price range. They will also know about any HOA issues, maintenance problems, or infrastructure issues that have come up in particular developments.

Check out this mortgage calculator to see how much you can afford

3. Find out the current HOA fees and any special assessments.

HOA (homeowner association) dues are often paid monthly or quarterly when you buy a condo. The fees are established by the HOA and are typically used to cover ongoing maintenance for all shared grounds, parking structures, amenities, landscaping, and shared community spaces.

That said, HOA fees vary widely across condos. Compare the HOA fees with other condos in the area to evaluate if the fees are worth the cost. Does the condo have the amenities that are important to you (accessible parking, fitness center, children’s park, pool or tennis courts, etc.) Find out what the HOA fees cover and what they do not.

Whether this will be your primary residence, or if you’re buying a condo in 2022 as an investment, take the cost of HOA fees into account. These fees are ongoing and will be on top of your mortgage and property taxes.

Find a qualified mortgage expert in your local area

4. Ask about rental policies for the condo development.

Knowing the rental policies is important when you buy a condo. As an investor, you’ll want to ask if there are any restrictions about renting the condo for 2022. Often the HOA will place restrictions on the number of rental units allowed and other restrictions. 

Even if this will be your primary residence, you may want to rent the property after a few years. On the other hand, maybe you want to live in a condo development with few renters. Will it lower your resale value if most units are rental properties with short-term tenants?

5. Make sure to get the right financing to buy a condo in 2022.

Ask your mortgage advisor for a quick list of documentation you’ll need to help keep things on track.

Financing a condo is different from applying for a single-family home mortgage. Mortgage lenders have some regulations that are unique to buying a condo. As a result, there can be obstacles along the way that make it more difficult to get approved quickly.

Be prepared with a 20% down payment if possible and all your documentation in order. If you’re planning on a lower down payment, ask about an FHA loan. FHA loans are easier to qualify for, but they have stricter requirements for condo developments. For example, FHA loans require that at least 80% of the condos are owner-occupied. FHA loans also require a stricter inspection process, including the overall development and grounds in addition to the specific condo unit you want to buy.

If you’re self-employed or plan to qualify using non-standard income, your advisor can talk with you about additional information that will be required.

Related: Boost your credit score in less than 60 days

Finally, get pre-approved to secure the lowest mortgage rate.

Typically, a qualified borrower can get a mortgage pre-approval letter in just a few days. Depending on your situation, it might take a bit longer, which is why it’s wise to start early.

Connect with a local mortgage advisor so you can make sure all your documentation is in order. If you have good credit and verifiable income, getting pre-approved for a mortgage is a quick process.

If you have a financial situation that is less common, getting pre-approved for a mortgage is even more important, so you aren’t faced with holdups when you’re ready to make an offer. A qualified mortgage advisor can keep things moving quickly.

Once you’ve got your mortgage pre-approval letter, it’s time to make those offers!

Taking Action

If you’re ready to buy a condo in 2022, getting pre-approved can put you on the fast track to homeownership. Whether you are a first-time homebuyer or a homeowner ready to invest in a second property, we can help you secure your best mortgage. Connect with a local mortgage advisor to discuss your loan options and build financial security. We’d love to help.