What Length of Loan Should You Choose?

Chino Hills, CA, May 5, 2015—Shopping for the perfect mortgage can be just as important as shopping for the perfect home. In the following article, Rey Romero, REALTOR® at CENTURY 21 Award runs down the pros and cons of two of the most popular mortgages: the 15-year and the 30-year.

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“The 15-year mortgage offers you a chance to save thousands of dollars over the life of the loan,” explains Rey. This is because the interest rate is typically lower and amortization is half that of the 30-year loan, which means that the total interest paid on the 15-year note, as compared to a 30-year note, is significantly less because of the shorter borrowing period.

Put another way, a 15-year loan accrues principal much more quickly than a 30-year loan, so you get to own your house in half the time.

However, Rey cautions, because you are building equity faster and paying down the loan sooner, a 15-year mortgage requires higher monthly payments.

“Get a lender to help you calculate the overall savings of the 15-year loan versus the 30-year mortgage,” suggests Rey. In the end, though, base your decision on your circumstances and overall financial plan, such as whether you are nearing retirement age and also will have to shell out college expenses for children, in which case a 15-year loan may not be for you. Remember that your spending habits, budget, and financial goals should all be considered before making a final decision.

Not sure if a 15-year or 30-year loan is right for you? You could consider the 40-year loan, which often entices those looking for smaller monthly payments.

“While this may seem appealing, the shorter-term loan is usually more advantageous for the homebuyer,” says Rey. The drawback of a longer loan becomes apparent simply by calculating the cost of additional interest payments, which can total thousands for the privilege of just saving the difference of a few dollars in monthly mortgage payments.

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For more information on loans, please contact Rey Romero at Rromero@century21award.com, (909) 772-9202, or www.century21award.com/agents/ReynaldoRomero

For more information on real estate, please contact CENTURY 21 Award at info@century21award.com, (800) 293-1657, or CENTURY 21 Award.

How Does a Mortgage Work?

La Jolla, CA, Apr 7, 2015—For those new to the real estate process, understanding the inner workings of a mortgage can be a confusing process. “In the simplest terms, a mortgage is a loan that is secured by real property,” says Kevin Fayad, REALTOR® at CENTURY 21 Award. When someone takes out a mortgage, the lender holds title to the home until the loan is completely repaid. If you fail to pay up, the lender has a right to take the property, sell it, and recover the money that is owed.

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So how much mortgage do you need? The amount of a mortgage will vary greatly depending on the down payment you make to reduce the amount of money that is needed to finance the home. You may put as much money down as you like, or you can sometimes pay as little as 3 to 5 percent of the purchase price, or sometimes nothing at all.

“The more you put down, the more you reduce the amount that is financed, thereby lowering your monthly payment,” says Kevin.

The monthly payment consists of both principal and interest but also typically includes additional amounts to cover property taxes and insurance – specifically hazard insurance and private mortgage insurance, the latter of which is required for down payments less than 20 percent of the purchase price.

If you're wondering how much home you can afford, you can turn to your real estate agent, who has information on lender loan requirements and will be able to calculate a rough monthly figure you can afford based on the maximum monthly payment for the loan, taxes, insurance, and any type of maintenance fees. This pre-purchase evaluation can save you a lot of time spent looking at properties you cannot afford.

“Lenders also routinely calculate what you can afford and can pre-qualify you for a loan even before you begin your home search,” says Kevin. “This way, you know exactly how much you can afford to buy.”

Lenders generally stipulate that you spend no more than 28 percent of your gross monthly income on a mortgage payment or 36 percent on total debts.

“Ultimately, the price you can afford to pay for a home will also depend on other factors besides your gross income and outstanding debts,” Kevin explains. They include the amount of cash you have available for the down payment, your credit history, current interest rates, closing costs and cash reserves required by the lender, and the type of mortgage you select.

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For additional information on mortgages, please contact  Kevin Fayad at kevinfayad@century21award.com, (619) 925-4445, or www.century21award.com/agents/KevinFayad

For more real estate information, please contact CENTURY 21 Award at info@century21award.com, (800) 293-1657, or CENTURY 21 Award.

What is A Shared Equity Mortgage?

YORBA LINDA, CA, Feb 17, 2015—One lesser known option in the mortgage playing field is the shared equity mortgage. Also known as a partnership mortgage, a shared equity mortgage can be a good way to purchase a home with little or no money down. In such an arrangement, the borrower/homebuyer has an absentee partner who, as the investor, provides all or some of the down payment.

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“Equity sharing is not as popular in a slowly appreciating real estate market as in a rapidly appreciating one when equity investors are easy to find,” explains April Reiss, REALTOR at CENTURY 21 Award. A type of equity sharing called tenants-in-common partnerships is becoming increasingly popular, especially in high-priced markets.

“First-time buyers are usually most interested in a TIC arrangement because it gives them a way to buy property collectively with an unrelated partner,” comments April. However, loan underwriting standards are more complicated with these types of deals because lenders have more than one party's financial situation to assess.

“It is a good idea to hire an attorney to help draft a shared equity agreement,” suggests April.

However, it's important to note that shared equity and shared appreciation mortgages are not the same thing. With a shared appreciation mortgage, or SAM, a borrower receives a below-market interest rate in return for the lender receiving a share, usually 30 to 50 percent, in the future appreciation of the property upon its sale.

“Introduced in the early 1980s, when interest rates were high enough to make qualifying for a mortgage a real challenge, the SAM has never really caught on,” April explains.

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For additional information on shared equity mortgages or for buying and selling your home, please contact April Reiss at areiss@century21award.com, (714) 501-2379, or CENTURY21award.com/agents/AprilReiss

For more real estate information, please contact CENTURY 21 Award at info@century21award.com, (800) 293-1657, or CENTURY 21 Award.

Three Ways to Avoid Getting Outbid on Your New Home

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"Bidding for a new home can get pretty fierce in today's market," said Gibran Nicholas, Chairman of CMPS Institute, an organization that trains and certifies mortgage bankers and brokers. "In some cases, you may be competing with more than a dozen other buyers who are bidding on the same property." Here are three potential solutions to avoid getting outbid on your new home:

1 - Turn in your loan paperwork BEFORE you place an offer. 

 In many cases, you are bidding against cash buyers who don't need to wait for financing approvals. Look at it this way: if you were the seller, would you prefer to do business with a buyer who needs to wait for financing approvals, or a cash buyer who can close the deal quickly? "That's why it's important to be proactive," Nicholas said. "Provide your mortgage lender with things like your source of down payment funds, your asset documentation, your credit report and your income documentation. This way, you'll be in a better position to close the deal quickly and compete with those cash buyers."

2 - Pay cash, but do it right. "Keep in mind that you only have 90 days after closing to place a mortgage on a property that you bought with cash if you want to secure your tax deduction," Nicholas said. "In order to get that loan approval after closing, you'll need to document the source of funds that you used for your cash purchase. Talk to a CMPS professional for more details so that you can avoid problems down the road."

3 - Consider lender-paid mortgage insurance. Lender paid mortgage insurance allows you to accept a slightly higher interest rate in exchange for no mortgage insurance. "This is very useful because it's often less expensive than FHA insurance or Private Mortgage Insurance," Nicholas said. "The lower monthly payment that results with this option can help you to afford a higher priced home, or at least get more comfortable paying at or above list price for the home you want."

Source: HomeQB.com

Reprinted with permission from RISMedia. ©2014. All rights reserved.

Understanding Mortgage Credit Certificates

TEMECULA, CA, Aug 19, 2014—The process of obtaining a mortgage can be lengthy, and confusing. With so many different mortgage options available, it's easy for hopeful homebuyers to feel overwhelmed. In the following article, Mike Rangel, REALTOR® at CENTURY 21 Award gives us the rundown on a popular mortgage option: the mortgage credit certificate.

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“A mortgage credit certificate, or MCC, makes it easier for eligible buyers to qualify for a mortgage loan,”
explains Rangel. Offered by many city and county governments, these certificates allow first-time buyers to take advantage of a special federal income tax write-off, which can be incredibly helpful.

Under MCC programs, the lender can reduce the housing expense ratio – the percentage of gross monthly income applied toward housing expenses – by the amount of the tax savings. Normally, lenders reject loans if the housing expense ratio is too high.

According to Rangel, program requirements for MCCs vary, although most adhere to the following guidelines:

• The buyer must live in the home being purchased with an MCC-assisted mortgage.
• Total household income cannot exceed certain limits.
• The buyer cannot have owned a principal residence within the past three years. “This restriction may be waived if a property is purchased within a certain targeted area," notes Rangel.
• The purchase price must fall within an established limit.

“When looking to obtain a mortgage, it's important to explore all of your options,” says Rangel. More information is available by calling your local housing or redevelopment agency, or contacting your real estate agent.

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For more information on mortgage credit certificates, please contact Mike Rangel at mikerangel@verizon.net, (619) 846-9487, or CENTURY21Award.com/agents/MikeRangel

For more real estate information, please contact CENTURY 21 Award at info@century21award.com, (800) 293-1657, or CENTURY 21 Award.com

5 Big Mortgage Mistakes to Avoid

SAN DIEGO, CA, May 06, 2014—Applying for a mortgage can be a daunting task. It takes many hours, lots of paperwork, and possibly a headache or two. Below are several mistakes to avoid when on the hunt for a mortgage.

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Not checking your credit. “This should be your first step in applying for a mortgage,” says Christian Van't Vlie, REALTOR® at CENTURY 21 Award. Check your score months before applying for a mortgage so you know where you stand, and have time to make any changes if necessary.

Not getting pre-approved. A mortgage pre-approval is one of the best things you can do to ease the home-buying process. During pre-approval, your bank checks your credit and examines your income, assets, and employment. “Before shopping for a home, get pre-approved,” advises Van't Vlie. “Many sellers won't take you seriously otherwise.”

Applying for new credit AND a new mortgage. “Do not apply for a new line of credit before or during the mortgage application process – it hints at financial instability, and you're seen as a greater risk,” says Van't Vlie.

Changing jobs. If you're thinking about switching jobs, then hold off on the mortgage application, or stick out your current position for longer. “While a change in the same field doesn't necessarily mean you will be rejected, a big change - like a brand new career - can be a red flag,” notes Van't Vlie.

Not seasoning your assets. Uncle John is giving you $10,000 to put toward your mortgage? Terrific. Make sure it's in your account months before you apply for a mortgage. New funds do not equate to financial stability, and your underwriter will catch on.

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For more information on obtaining a mortgage, please contact Christian Van't Vlie at christianvantvlie@century21award.com, (619) 356-1919, or www.sandiegoathome.com

For more real estate information, please contact CENTURY 21 Award at info@century21award.com, (800) 293-1657, or CENTURY 21 Award.

Should You Prepay Your Mortgage?

SAN DIEGO, CA, Apr 29, 2014—At first glance, prepaying your mortgage sounds like a financially intelligent move. By paying extra principal, your house will be paid off faster, and you will end up paying less interest over the life of your loan.

“You get to save thousands of dollars and shave years off the life of your loan because the additional payments made toward your monthly principal basically constitutes a partial prepayment of your mortgage,” says Jen Cowen, REALTOR at CENTURY 21 Award.

However, there can be some drawbacks; each mortgage has specific terms describing how and when prepayment may occur. Some lenders impose a penalty if you repay the loan too soon.

The total savings potential also will depend on how long you plan to live in your home. If you expect to move in the near future, do not expect to reap savings as large as those gained by people who pay ahead of schedule until they own their home free and clear.

“If you're putting additional payments into your mortgage, make sure you're also building up your retirement fund. While your home is your greatest investment, you don't want to end up house rich and cash poor in the end,” advises Cowen.

Another note from Cowen; If you plan to speed up your mortgage payments, do it on your own instead of enlisting the help from a bank, who may charge a fee.

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For more information on paying off your mortgage, please contact Jen Cowen at jencowen@century21award.com, (858) 735-9171, or  www.century21award.com/agents/JenCowen


For more information on real estate, please contact CENTURY 21 Award at info@century21award.com, (800) 293-1657, or CENTURY 21 Award.