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Do I Need a Mortgage Pre-Approval?

WHY You Need a Pre-Approval

 

 

If you’ve thought of buying a home, you’ve probably heard that one of the very first items on your ‘to do’ list needs to be obtaining a pre-approval from a lender.  Not a pre-qualification.  Some of the more common reasons on why a pre-approval is necessary involve making sure a credit profile is up to par, making sure your scenario meets lender guidelines, and giving sellers a warm & fuzzy feeling when you walk into their home.  These reasons are

Mortgage preapproval is necessary for the best homebuying experience
Getting a pre-approval is non-negotiable if you’re serious about buying a home, especially in a competitive market.

important, but what about the “perfect” buyers?  The ones with modelesque credit, tremendous income, lots of 0’s on the end of their assets, and an overall profile that has bankers knowing at their doors.  Well, they need a pre-approval, too.  A full and complete one.  But WHY?  We’ll get there.

 

 

The Basics

 

If you’re not pre-approved and you’re not a “perfect” buyer, you’re kind of wasting everyone’s time (we say “kind of” to be kind).  But think of it this way – you’re asking a real estate professional to take time to meet you, learn your wants and needs, and to spend time finding the perfect place for you to call home.  THEN, they’re meeting with you to tour these homes, hear why you don’t think they’re so perfect, and go back to find more listings for you after getting feedback.  Nobody’s complaining, as that’s part of an agent’s job, but would you do all of that with 0 chance of ever seeing a dime of compensation?

 

 

Let’s face it though, you’re a decent person so you probably care about your real estate professional that’s working their butt off for you, but what’s really important is you.  Do you want to go out, fall in love with a certain price range, style of home, or area, only to find out you’ve got no chance at buying, or a few years to go before you’re going to be able to buy?

 

 

In a hot market, the time between putting in an offer and agreeing to close is often one way to gain an advantage in a multiple offer situation.  Even if you CAN get preapproved, there may be some work that can be done along the way to improve your rate and terms – with a short escrow or contract period, you may not have the luxury of that time.  Wouldn’t it be nice to have some extra time to consider these things that could potentially save you thousands of dollars.  With a pre-approval, you’ll have that time.

 

 

If you made it this far and are still thinking “But I’m PERFECT!” this next one’s for you:

 

 

Let’s say you’re in a hot market and are working with an agent that’s agreed to show you homes sans pre-approval.  You find THE ONE.  This home is nearly as perfect a house as you are a buyer.  The listing agent demands a pre-approval letter when an offer is submitted.  “No problem” you think, and you call your Mason Mac loan officer to work on the pre-approval.  Your loan officer gets back to you in what seems like no time at all, your agent gets ready to send over your offer, annnnd just like that, it’s gone.  While you were getting your pre-approval, someone (less perfect of a buyer, no doubt) came through with the pre-approval they obtained before they looked at the home, and made the seller an offer they couldn’t refuse (even if the offer was less desirable than yours may have been).   You just lost the home of your dreams because you didn’t have a pre-approval.

 

The Bottom Line

 

A full pre-approval protects everyone – your lender, sellers, your buyers agent, and most importantly – you.  Is it an inconvenience?  Not if you’re serious about buying a home.  If anything, it just gives you a head start by providing your lender with documentation they’ll need anyway once you find a home.  If your real intent is to buy a home, a pre-approval prior to looking at homes is a must.  Especially in a hot market, you don’t want to miss out on a chance at your dream home because you don’t have your pre-approval completed.

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Mason Mac Supports Veterans in LA County

Mortgage Lender in Southern CA

This past weekend, Wendy Walker, branch manager of Mason Mac’s Newport Beach/Balboa Island branch and her team represented Mason Mac at the Los Angeles VAREP Veterans Housing summit.  VAREP is the Veterans Association of Real Estate Professionals, a HUD-approved non-profit dedicated to increasing sustainable home ownership, financial literacy, VA loan awareness, and economic opportunity for the active-military and veteran communities.

The LA Veterans Housing Summit event focused on education for veterans with a specific focus on the VA loan program and the home buying process.  Included in the summit was

Veterans Mortgage Loans
Mason Mac is here to serve our veterans and guide them through the VA loan process

information on the importance of good credit, available down payment assistance products, and a summary of the local housing market.

Mason Mac proudly offers the VA loan program throughout the greater LA area (and in all of the markets we serve), with a 2017 VA loan limit up to $636,150 (loan limit varies based on county/area) – Veterans may borrow more than the available market loan limit, however the loan limit caps the amount of money that can be borrower with no down payment for most veterans.

At the VAREP Veterans Housing Summit, Wendy’s team spoke with veterans from all branches of the military, and they were the only non-bank lender in attendance.  Being a non-bank lender, Mason Mac specializes in VA loans with no overlays – that means VA guidelines are our guidelines, and our VA loans are underwritten by our in-house staff of underwriters.

Also on site at the VAREP Summit were local real estate agents focused on helping veterans view inventory of homes in the area that were for sale and of interest to the attending veterans.

The VA loan product is one of the most beneficial loan products available in today’s mortgage market.  For many veterans, here is no down payment requirement, and no monthly mortgage insurance.  Perhaps best of all, rates on VA loans are some of the most competitive across the entire spectrum of mortgage products.  Low rates, no monthly PMI, and a streamlined process make the VA loan a premium product for eligible veterans and their families.

 

Mason Mac offers the VA loan product in every state in which we’re licensed, and the Mason Mac team consists of many VA loan experts that know the product inside and out.  Like Wendy and her team at the LA Veterans Housing Summit, your Mason Mac loan officers are there to educate you and guide you through the process of exploring loan programs, finding the best one for you, and using it to get into your dream home – and if you’re a veteran, the whole process can be very easy and not involve a lot of money.

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How Much Money Do I Need to Buy a Home

If you’re thinking about buying a home, one of the first questions you may have is how much money you’ll need.  While the answer is almost always “it depends”, one thing is for sure – most people are surprised to find out it takes less money than they think to buy a new home.  In fact, there are many mortgage programs that help people buy homes with NO money out of pocket, and other programs that require very little.  We’ll give you some of the basics here, and if you have any questions, we invite you to reach out to your Mason Mac Loan Officer for full details.

The 0% down payment options

Low down payment option mortgages
The cost of buying a new home may be a lot less than you think with our low down payment options

There are several 0% down payment mortgage options that allow a borrower to buy a home with no down payment money.  Some of these programs also allow for a seller to help with closing costs, so if you qualify for these loans it is possible to get a house without putting any money down!

The VA Loan

If you’re an eligible veteran, you can get up to 100% financing to buy a new home, and both a lender and seller can contribute to closing costs, so you’re able to get a new home for very little out of pocket cost.  VA loans offer a huge bonus in that they have very low fixed rates and no monthly mortgage insurance.  This combination of factors gives veterans access to one of the best loan products available.

The USDA Loan

USDA loans are available to low and moderate income buyers looking to buy outside of major metropolitan areas.  A Mason Mac loan officer can quickly tell you if you’ll qualify based on your income and the area you’d like to buy a home.  Like VA loans, USDA loans require no down payment and allow a seller to contribute toward closing costs, so it’s possible for buyers using a USDA loan to get into a home with little to no money out of pocket.

The DPA Programs

DPA stands for Down Payment Assistance, and comes in many forms.  Sometimes it’s a grant from a local county or organization.  Other times it’s a nationwide program that offers a 2nd mortgage to cover a down payment requirement. DPA comes in many forms, but usually has to be through an approved program that’s been given the OK by HUD or Fannie Mae.  DPA programs often assist with down payment but sometimes can help with closing costs as well.  Your Mason Mac loan officers are very familiar with DPA products in the areas we’re licensed.

The 3% Down Options

Do you need 20% down to buy a home?  This is usually a misconception when people are seeking a conventional mortgage loan, but in reality, you can get a conventional loan with as little as 3% down.  20% down avoids the need for mortgage insurance (PMI), but conventional loans are available with far less down, and like the 0% down programs, allows a seller to contribute toward closing costs.

The Just a Little Over 3% Option

FHA mortgage loans require a 3.5% down payment, and can sometimes offer lower rates and cheaper PMI than conventional loans, making them a great loan option for many borrowers.

FHA loans are also able to be accompanied by DPA help to turn a 3.5% down payment requirement into $0 out of pocket for a borrower down payment.  Sellers may contribute up to 6% of a purchase price toward a buyers closing costs, so FHA is another viable solution for buyers without too much of a down payment.  FHA is especially helpful for buyers with a low down payment and less than perfect credit.  Rates are more forgiving on FHA loans than conventional loans for past credit issues and lower FICO scores.

 

Whether it’s through FHA coupled with a DPA product, a conventional loan, or if you qualify for USDA or VA programs, chances are the amount of money you need to buy a new home is less than you think.  Call a Mason Mac loan officer today to get details, and learn which option is the best for you.  Whether you’re short on funds or looking to put 20% or more down, we’ll have loan options for you!

 

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3 Useful Tips for First-time Homebuyers Trying to Navigate the System

3 Useful Tips for First-time Homebuyers Trying to Navigate the SystemWhether you’re tired of renting, need more space or want to make an upgrade, buying your first home is the solution. However, if you’ve never bought a home before, the experience can seem a bit daunting at first. Let’s explore a few useful tips that are helpful for first-time homebuyers who are new to the process of buying real estate.

Tip #1: Begin With The End In Mind

Before you start exploring local home listings and shopping around, it’s worth asking yourself both what you ‘need’ in a home and what you ‘want’ in a home. For example, are you single or married? If you are married or are likely to be in the near future, are you planning on having a family? Will you need space for pets? What area of the city is most convenient for your commute? And so on. If you start by knowing exactly what you need, it will be that much easier to narrow down your options.  Short and long term considerations are important when making a financial and lifestyle decision as big as buying a home.

Tip #2: The Market Determines The Value Of A House

The second tip to keep in mind is that your local real estate market is what determines how much a home is worth. What you can afford has nothing to do with a home’s value, nor does your opinion of its current condition. In some cities, homes will sell with the intention of being torn down after the purchase completes.  For this reason, we highly recommend working with a local real estate agent that knows the market place inside and out.

Tip #3: Let the Market (and your Real Estate Agent) Make Your Offer

Finally, when you’re ready to make an offer, it should be decided upon to offer a price reflective of the market you’re in.  This is where working with a buyers agent can be a huge advantage over going at it alone.  If you’re in a strong seller’s market, you may have to make a high offer and forego some contingencies to be competitive.  In a softer market, you can afford to make an offer that’s more open to negotiations.  Your real estate agent can show you comparable sales and give you a detailed analysis of the local market to help determine where your offer should start.

 

Before you’re ready to buy your first home, please be sure to reach out to your local Mason Mac loan officer and they’ll get you prepared for a successful home buying journey.

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Shopping for a Mortgage – A How To Guide

When it comes to getting a home loan, many people struggle with where to find the best loan for them.  Shopping for a mortgage is different than shopping for a toaster.  With a toaster, you can go on Amazon or walk into a store, pick the toaster, pay for it immediately, and if it doesn’t work the way you like, you can return it.  If the price changes at the register, you can opt to put it back on the shelf.  If it breaks the first time you use it, it should be an easy return.  A mortgage is a bit more complicated.  There is no return policy, and if rates and fees end up higher than advertised, sure, you have the option of “putting it back on the shelf”, but it may mean missing out on a home you love and a ton of wasted money.

Most people know that shopping for a mortgage is the way to go when looking for the best loan, but few people know how to shop for a mortgage loan.

 

Mortgage shopping tips
It’s important to not only know TO shop for a mortgage, but HOW to shop for a mortgage

Get Referrals

The best place to start when shopping for a mortgage is where other people have had success.  Talk with friends and family and find out who they used, and if they were satisfied.  Talk with your Realtor and see why they recommend the lender they do.  Referrals are a great way to put together a short list of potential lenders that you’ll want to work with.

Keep in mind, online reviews are NOT referrals.  Many companies and individual loan officers game the system online, obtaining fake reviews and testimonials to paint themselves in a good light.  While some reviews are accurate, it’s tough to tell what’s real and what’s not online, so personal referrals are a much better option than seeking out highly rated online lenders

 

Get pre-approved

You should only have to complete a full loan application with one lender in order to get started on shopping.  With one pre-approval, you’ll have the information every lender will need to quote you rates and fees – your credit scores, your debt-to-income ratio, and all of the other info required to get you an accurate quote.  Keep in mind though, you’ll want a full pre-approval.  If a lender doesn’t request your financials or tells you they don’t need to pull credit for a pre-approval, there’s no way they can give you an accurate quote – this is a red flag to find a new lender and FAST!

 

Do your shopping on the same day

Once you have a short list of referred lenders, do all of your shopping in as short a time window as possible.  The reason is that mortgage rates change daily, and sometimes several times in a single day, so calling lenders on different dates is going to result in a really poor comparison and cause a lot of confusion.  If you compare lenders on the same day, you’ll get an idea of who has the best rates and prices, and you’ll truly be comparing apples to apples.  Getting quotes spread out over a period of days or weeks could end up costing you a lot of money by not having accurate information.

 

Focus on rate and fees

Some lenders have great rates but astronomical fees.  Others have no fees but the rates are ugly.  Lenders fees and rates are effected by a lot of things – their loan officer’s compensation, operations staff, marketing, and more, so it’s important to remember the cheapest lender may not provide the best mortgage experience or the best loan.  And the lender with the lowest rate may have a poorly paid and inexperienced staff that can either make the loan process a nightmare, or worse, cause you to lose out on a home!

Your best bet when it comes to cost is to find a lender with competitive rates and competitive fees.  Usually the ones that are lowest aren’t the best companies, and the ones on the higher end are unnecessarily expensive.

 

Avoid Big Banks

Think of the companies you constantly see in TV advertisements, on arena floors or stadium walls.  Now think about how they get the money for those big advertising budgets.  Did it sink in yet?  Using big banks with huge advertising budgets usually means you’ll be paying a premium in rate or fees so they can cover that expensive marketing.

Bigger banks are also notorious for a sloppy loan process, due in large part to their size (files are often transferred from one department to another, without each department knowing the loan file inside and out).

For the best service experience and lower costs, you’ll generally have better luck with a mid-sized or smaller lender that doesn’t need to charge people to cover for a multi-million dollar marketing budget.

 

As a lender, you’d think we wouldn’t want you to be shopping around, but in reality, when a borrower shops it’s better for them and us.  When you’ve already been quoted ridiculous rates and fees, you’ll more easily see the value in our well priced products.  And when you’ve spoken with a loan officer from another company that seems to not be able to get you off the phone fast enough, you’ll appreciate our team’s dedication to asking the right questions to ensure you’re getting the right product.  We know that not every lender can match our level of service, and we know that we’re very competitively priced, but you won’t know it unless you shop.  So we hope with these tips, you’ll be able to feel comfortable when seeking out a mortgage loan.  And if after you’re done shopping for a mortgage, you decide Mason Mac is the lender for you, we’ll be here waiting to help!

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How Much Mortgage Can I Qualify For?

Learning How Much Mortgage You Can Qualify For

It’s one of the most frequently asked questions when someone begins their search for a home.  “How Much Mortgage Can I Qualify For?” is one of the most important questions someone can ask, because it will help determine what type of home they will look for, what area(s) they may look in, and will allow a Realtor to really narrow down a home search and focus on what’s within a home buyer’s reach.

how much mortgage can I get
Asking the right questions and working with someone that provides the right answers is paramount to a good home buying experience

 

Believe it or not, though, “How Much Mortgage Can I Qualify For?” is a secondary question compared with “How much Mortgage Should I Qualify For?”.  The real starting point is figuring out a monthly payment that makes sense.  Mortgage loan qualifying is largely based on a term called “Debt to income ratio”, or DTI.  DTI is a percentage of your income that is devoted to debt, and is always calculated as a percentage.

Personal Considerations

For some people, a high DTI is not a big deal, but for others, it could be disastrous.  Many loan programs (not all) don’t factor in a borrower’s disposable income – the actual dollar amount left over at the end of each month after all the bills are paid, utilities are paid to keep the lights on, and groceries are purchased.  So for a borrower with lower income, a high DTI could be disastrous as it could mean very limited disposable income to cover life’s unexpected events.  That same DTI may be no big deal for someone with lots of disposable income on hand.

 

So how much mortgage can you qualify for?  Your loan officer will guide you through different loan options available to you, and your maximum qualifying loan will depend on a few things – your income, credit, and amount of money to put down as a down payment being the big ones. Typically, having better credit will allow a higher DTI, and putting more money down, therefore reducing your loan amount, will also help lower the DTI.

Property Considerations

The type of home you buy will also determine how much mortgage you can qualify for.  For example, a condominium property may seem affordable, but could come along with high HOA dues or property assessments that may make the property unaffordable, even though the purchase price could be lower than a single family home.  Likewise, a single family home could have additional taxes attached to is, such as Mello Roos taxes in California or 3rd party tax assessments and additions that could make the cost of ownership much higher than indicated by a price tag.  This is where having a team helping you along the way makes a huge difference in the home buying process.  A good loan officer can help you price out different purchasing scenarios, and knowing the max you can qualify for AND the max monthly payment you want to qualify for, a good Realtor will guide you to properties that you’ll like AND be able to afford, all things considered.

 

Another consideration that comes along with property types lies in unique properties such as condotels, non-warrantable condos, or agricultural and mixed use properties.  The price tags on such properties may make them appealing, but additional down payment or asset reserve requirements could put this type of property out of reach.  This, again, is where working with a great home buying team can make a ton of difference in your experience.

 

Planning for the future

Nobody has a crystal ball, but thinking about the future can help you determine how much mortgage you qualify for, too.  Are you working in a field with steady income raises?  Are you relocating on a job offer in a situation where a co-borrower will be moving too and finding a job once settled in?

Perhaps you’re interested in buying a multi-unit home where you’ll have both job income and rental income to help cover mortgage payments and add additional cash flow?  Perhaps you have an auto loan with a high monthly payment that’s about to go away, or your student loans are about to be paid off?

All of these scenarios and more could affect the amount of mortgage you qualify for.  Sometimes, it makes sense to temporarily carry a high DTI because you’ll soon see your cash flow and disposable income increase.  It’s important to not overanalyze, but to consider the future, and ultimately, make a decision that leaves you comfortable and able to cover your mortgage, your other debts, and still live the lifestyle you desire.

 

Buying a home is a huge decision, and answering the questions “How much mortgage can I qualify for?” and “How much mortgage should I qualify for?” is the first step toward successfully navigating the home buying process toward your path to homeownership.  Better yet, having a team to help guide you along the way and answer the many questions you’ll have is the best way to assure yourself of a pleasant home buying experience, and a loan that will keep you happy in your home for years to come!

Have questions about the home buying process?  Ask the professional that shared this post with you or give us a call at 877-ASK-MMMC (275-6662)