Category: Tips on Buying a Home

The True Strength of Homeowners Today

Posted on | by Kovacs

The real estate market is on just about everyone’s mind these days. That’s because the unsustainable market of the past two years is behind us, and the difference is being felt. The question now is, just how financially strong are homeowners throughout the country? Mortgage debt grew beyond 10 trillion dollars over the past year, and many called that a troubling sign when it happened for the first time in history.

Recently Odeta Kushi, Deputy Chief Economist at First American, answered that question when she said:

“U.S. households own $41 trillion in owner-occupied real estate, just over $12 trillion in debt, and the remaining ~$29 trillion in equity. The national “LTV” in Q2 2022 was 29.5%, the lowest since 1983.”

She continued on to say:

“Homeowners had an average of $320,000 in inflation-adjusted equity in their homes in Q2 2022, an all-time high.”

What Is LTV?

The term LTV refers to loan to value ratio. For more context, here’s how the Mortgage Reports defines it:

“Your ‘loan to value ratio’ (LTV) compares the size of your mortgage loan to the value of the home. For example: If your home is worth $200,000, and you have a mortgage for $180,000, your LTV ratio is 90% — because the loan makes up 90% of the total price.

You can also think about LTV in terms of your down payment. If you put 20% down, that means you’re borrowing 80% of the home’s value. So your LTV ratio is 80%.”

Why Is This Important?

This is yet another reason we won’t see the housing market crash. Home equity allows homeowners to be in control. For example, if someone did need to sell their home, they likely have the equity they need to be able to sell it and still put money in their pocket. This was not the case back in 2008, when many owed more on their homes than they were worth.

Bottom Line

Homeowners today have more financial strength than they have had since 1983. This is a combination of how homeowners have handled equity since the crash and rising home prices of the last two years. And this is yet another reason homeownership in any market makes sense.

Three Things Buyers Can Do in Today’s Housing Market

Posted on | by Kovacs

It’s clear the 2022 housing market has been defined by rising mortgage rates. With rates on the rise, it’s also become more costly to purchase a home. According to the National Association of Realtors (NAR):

“Compared to one year ago, the monthly mortgage payment rose to $1,944 from $1,265, an increase of 53.7%.”

If you’re thinking of buying a home or have been trying to recently, that’s a big increase in monthly mortgage payment – and it may be causing you to press pause on your plans. This jump is making homes less affordable, especially compared to the last two years when mortgage rates were at historic lows.

The good news is you can navigate today’s housing market and this rising rate environment with a few simple tips. Here are three things you may want to consider to help make your homeownership goals a reality.

1. Expand Your Search Area and Criteria

If you’ve been looking for a home in the city center or a specific area that’s starting to feel out of your price range, you may want to try looking a little further out in a location that could be more affordable. Expanding your search location or re-prioritizing the items on your wish list can open up opportunities you haven’t considered, and that could help you afford more of what you need (and want) in a home. As CNET notes:

“Area growth is likely to keep pace with the market, which means that the outskirts of town might be hopping within five years. Consider stepping out of your ideal location by searching in the nearby cities. You may find better prices and more square footage.”

2. Explore Alternative Financing Options

Working with a trusted lender to learn about the different loan types and options is essential too. According to Nerd Wallet:

“A variety of mortgages are available with varying down payment and eligibility requirements.”

Experts know how to point you in the right direction when it comes to exploring ways to find the best home loan for your situation. With rising mortgage rates making it more costly to finance a home today, there may be an ideal option out there your loan officer can introduce you to. This could make a home purchase more affordable and within your financial reach over the life of your loan.

3. Look for Grants, Gift Funds, and Down Payment Assistance

There are also many options available when it comes to securing the funding you need to purchase a home. One valuable resource to explore is downpaymentresource.com. Searching for specific down payment assistance options available in your local community could be a game changer when it comes to taking your first step toward homeownership. As NAR indicates:

“Many local governments and non-profit organizations offer down-payment assistance grants and loans, targeted to area borrowers and often with specific borrower requirements.”

Plus, there are programs and special benefits for individuals working in certain professions or with unique statuses, including teachers, doctors and nurses, and veterans.

Ultimately, that means there are many federal, state, and local programs available for you to explore. The best way to do that is to connect with a local real estate professional and your lender to learn more about what’s available in your area.

Bottom Line

If you’ve been searching for a home and have found yourself stepping out of the process because you’re worried about rising costs, let’s connect. Having a team of local advisors on your side may be just what you need to guide your search in a new and more affordable direction.

4 Mortgage Myths Set Straight

Posted on | by Cuselleration

Going through the mortgage process can either be very frustrating, or surprisingly easy, depending on the circumstances. There are a lot of myths and half-truths that are commonly perpetuated in the industry, so be sure to read up on the four mortgage myths below so you can be well-prepared before starting the process.

Realtors Don’t Care About Your Lender: You are always free to pick whatever lender you want, thanks to the Real Estate Settlement Procedures Act of 1974. However, many realtors will pitch you their list of lenders.

If you go with a lender who is not from the area, the entire process might be slowed down a lot since they might not have the necessary experience dealing with situations in the area of your home. Realtors do notice this.

Plus, many realtors working for sellers usually opt for buyers who have better quality loan approvals. This means local lenders usually will win out, since they are known and respected by local listing agents.

You’ll Always Get The Quoted Rate: Rate quotes can and do change across the day because they are linked to daily mortgage bond trading. If you give a lender enough information, they might be able to lock a quoted rate so you do not have to worry about the price changing.

Locking a rate runs with a property and borrower, so you can’t actually lock your rate until you have come across a home you are ready to buy. Before this, you’ll need to stay in close contact with your lender as you are shopping to get new rates.

Always remember that a loan payment will be predicated on the locked rate, not the APR. The APR is merely a statistic which aides you in understanding fees.

Lenders Use Your Optimal Credit Scores: Many think lenders are going to use the best credit scores, especially if you are applying for a joint mortgage. However, the actually pick the middle across three credit scores, and then take the lowest one between middle scores (if you are applying for a joint mortgage).

Your rates are tied to your credit score, so this process could significantly drive up your rate, or even make you not eligible for the loan. Make sure to ask your lender about any possible exceptions to see what they can do, but keep in mind these types of exceptions are rare.

One exception, for co-borrowers, has to do with big loans over $417,000. Here, lenders might use the credit score that is associated with the higher earner, if that score is higher than the other borrower.

Click here to learn how to buy a home faster and smarter!

Fixed-Rate Is Preferred Over Adjustable Rate-Mortgages: A lot of people started to go with 30-year fixed loans after the financial crisis in 2008. People liked this idea because the rate and payment never changes, even though the rate is always higher for longer loans.

Before choosing a rate, think about how long you are willing to be in the home or keep the mortgage for. There are a variety of calculators out on the market that you can weight the pros and cons of each loan depending on your situation.

Just make sure the loan term is as close to the amount of time you are willing to stay inside of the home. This is to make sure your financing is maximized.

Are you in the market to purchase a home in Rancho Santa Margarita, Coto de Caza, or Mission Viejo? Click here to talk to the Kovacs Connection Team today!

Courtesy of Cuselleration

3 Things That Can Ruin Your Credit Score

Posted on | by Cuselleration

Whether you’re in Irvine, Laguna Niguel, or anywhere in Orange County, your credit score matters. Your credit score determines your history with money, which allows future lenders and landlords to gauge whether they can trust you with expenses and paying them on time. But if you aren’t forgetting to pay your bills on time and in full, why might your credit score still be low? Here are some things that affect your credit score that you may be overlooking.

Overusing Your Credit

Having trouble with controlling your finances may be a reason why your credit score is low. Even when you’re on top of your payments, you may be using your credit a little too much and this can harm your credit score more than you think. This may mean that if you had $2,000 as a line of credit, you are using $1,999 of it every month, which will cause you to earn a black mark on your credit score even if you pay it off before your bill is due. If possible, try to keep balances low on your lines of credit. You can keep track of how much of your credit you are using by calculating credit utilization rates, which is how much you currently owe divided by your credit limit.

Not Using Your Credit At All

You may think that not using your credit at all can keep your credit score healthy, but it can actually negatively impact your score. Not having a credit history may be equivalent to having a bad credit history in the eyes of lenders and landlords. Without a credit history, there isn’t a record to show whether you are able to use credit responsibly and maintain good balances or make payments on time. Not using your credit can also result in the bank closing your account, which can negatively impact your score.

Forgetting Past Overdue Payments

Small fragments of unpaid bills and fees greatly contribute to why you might have a poor credit score. Unpaid bills from a variety of sources can cause your credit score to sink if they are unresolved. To keep track of all your payments and make sure there aren’t any issues that slipped, sign up to receive a free credit report each year from credit-reporting agencies such as Experian, TransUnion, and Equifax.

If you want to secure a home or be able to borrow money in the future, be careful of any credit score pitfalls that can hurt your score. Discovering that you have a low credit score is not the end of the world because there are many approaches to fixing your credit score and all it takes is time. If you have any questions about your finances or need any help with fixing your credit score, contact the Kovacs Connection Team today!

Courtesy of Cuselleration

Benefits of FHA Home Loans

Posted on | by Cuselleration

The first establishment of the Federal Housing Administration (FHA) was in 1934. This is the same period when the country was coming out of The Great Depression. Being a branch of the National Housing Recovery Act, the Federal Housing Administration had a simple mission: to provide a platform where the number of homeowners can increase.

The ratio of homeowners at the time was 4 out of 10. Something had to be done in order for that to change.

But there was a limiting factor risk. There was the unavailability of enough quantity of private capital. Homeownership comes with a variety of advantages, which include facilitation of both economic and social growth, shaping the communities and provision of stability to the neighborhoods.

At the moment, the Federal Housing Administration is considered to be the largest mortgage insurer in the whole world. ‘Insurer’ is used in the place of ‘lender’. The reason for the FHA being a mortgage insurer instead of a mortgage lender is because the FHA doesn’t lend money, but instead insures it. They take the risk.

Mortgage lending procedures are facilitated by the FHA by ensuring all the banks and mortgage lenders from the risks that may be associated with giving a loan to an applicant that is buying a home for the first time or people that want to come off a big derogatory credit score issue.

One of the greatest achievements of the Federal Housing Administration is that is has enabled uncountable citizens of America, possibly your grandparents, parents or even you included, to purchase their slice of the American dream.

The Federal Housing Administration has an estimate of 4.8 million home mortgages to single families currently, and over 13,000 insured mortgages projects to different families in their portfolio.

The FHA principles that have been guiding it from inception to date are still intact.

It only requires a 3.5% down payment

Today, available to the home buyers are only few mortgage options that allow them a down payment of 5% or even less. The Federal Housing Administration is among the few.

The FHA mortgage allows home buyers to pay as low as a 3.5% down payment. Isn’t this good news? This is really beneficial, especially for the home buyer applicants who are not rich, wealthy or have not saved up a lot of money to be used as down payment. This is also of benefit to the home buyer that looks forward at saving up more money that will be used for his or her moving out expenses, renovation funds, emergency money or any other needs known to the home buyer.

Flexible credit qualifications

It is not often that you will come across mortgages that you are eligible for with a 580 credit score requirement.

For home buyers that have major derogatory credit issues like foreclosure, bankruptcy or short sale, the only option left for you to buy is FHA.

Are you in the market to purchase a home in Rancho Santa Margarita, Coto de Caza, or Mission Viejo? Click here to talk to the Kovacs Connection Team today!

Can You Transfer a Mortgage From One Person to Another?

Posted on | by Cuselleration

Enough research will tell you that most loans are not transferable as a result of the “due on sale” clause on them. What this means is that when the property on the loan is sold, then the entirety of the loans becomes due.

But you will also want to know that some loans do not have these due on sale clauses which make them transferable from the seller to the buyer. These loans are known as the “assumable loans.” There are three types of assumable loans:

  • VA loans – these loans are designed in such a way that they consider the service members who are constantly on the move as a result of their careers. Most of the loans that were closed before 1988 can still be moved freely without the need for any approval from the lender. The loans that are closed after that time, however, need approval from the lender to be closed.
  • FHA loans – these loans can also be transferable without the need of any approval from the lender if they were closed by December 1989. Otherwise, any other loans that were closed after that time need approval from the lender.
  • USDA loans – lender approval is required for these loans to be transferable.

Reasons why you want to transfer your mortgage

Taking over a loan usually saves a lot when it comes to closing costs. The buyer will not have to part with the fees to originate a new loan plus all the taxes and all the other closing costs involved. The buyer only has to pay the nominal fee that will assume the already existing loan. You do not even need to pay the down payment in this case.

There are, however, a couple of complications that come with mortgage transfers that you need to know about before you dive into the whole process.

Merits and demerits of mortgage transfers

You may not need to pay the down payment fees, but you will still need to pay a huge sum of cash to make the transfer.

As the buyer, you may not have enough cash at the moment to make the transfer. You have the option of taking a secondary loan which can cover all of the expenses. But these loans are usually accompanied by high-interest rates, which even makes the whole transfer process less attractive.

You also need to know that the original borrowers in the mortgage still retain some sense of responsibility for the loan unless there is a release that is in writing from the loan lender stating otherwise.

When the due on sale clause doesn’t apply

About every loan apart from the VA, USDA, and the FHA have due on sale clauses. However, there are some types of loan transfers that have exemptions. They have been listed below:

  • Transfer to a relative in case of death of the original borrower
  • Transfer to your children or spouse
  • Transfer to your ex-spouse if he/she continues to live there
  • Transfer to you in living trust if you stay in the property

Are you in the market to purchase a home in Rancho Santa Margarita, Coto de Caza, or Mission Viejo? Click here to talk to the Kovacs Connection Team today!

4 Valuation Methods for Investing in Real Estate

Posted on | by Cuselleration

Determining the investment value of your property isn’t the same as valuing a house you plan on living in. Well, then how do you do it? There are a couple of real estate valuation approaches that you can use whenever you calculate the investment value of a property.

Below are some of the advantages and disadvantages that each approach has. You need to familiarize yourself with each of these methods so you can easily relate to the many different buyers as well as sellers, and any situation you may be in. You should always keep in mind that there are no right or wrong methods of valuation.

When you think about investing in real estate, there are three main parts you have to have in mind; income, financing, and expenses. Here are four valuation methods you can use in the marketplace and their pros and cons.

1. Price per unit

To find the “price per unit,” you have to compare the cost of the property that you then divide by the units. Everything that you have learned about price per square foot you can always be applied to the price per unit. Price per unit does not take into account financing, income, or even expenses. You can use this method to test the wind, even though it is not in depth in determining the valuation method.

2. Cash on cash

This is a ration of the amount of cash flow that you, as an investor, would earn and comparing it with the cash that you invest. The formula for this method works by putting the cash flow before the tax and then dividing it by the cash invested. When you do your research, you will find that out of all the other financial benefits like tax savings, principal reduction, and appreciation you can use to own an investment in real estate, that cash flow is the most crucial. During that time, you will notice that most properties have to produce sufficient cash on cash return in order to make it worthwhile.

3 .Capitalization rate

Also called the “cap rate,” this is one of the common phrases you will always hear time and time again in the marketplace. Usually,the cap rate is expressed in the form of a percentage, and its formula works when you divide the net operating outcome by the cost. You may be kicking yourself asking what all this means by now.

You need to know that capitalization rate takes into account both expenses and income. The capitalization rate does not, however, take into account any financial aspects as most of its basis lies with the net operating outcome. The capitalization rate will always assume that you pay cash.

4. Gross multiplier

The cost of the gross multiplier is when you have to divide the cost of the property by the gross operating outcome. This valuation method does not take any income, expenses, or financing into account.

Are you in the market to purchase a home in Rancho Santa Margarita, Coto de Caza, or Mission Viejo? Click here to talk to the Kovacs Connection Team today!

5 Best Secrets to Buying a Home

Posted on | by Cuselleration

Buying a home is no easy task. In fact, many people find it to be very stressing and taxing, let alone the expenses that one has to incur. You also need to make sure that you do a little shopping around for the best homes to buy, the best locations, the best prices and the rates, etc. There are countless things that you need to look into before you set out to look for a new home. And that is where this article comes in to rescue you from all that hustle by highlighting five of the best kept secrets to buying a new home.

1. Keep your money exactly where it is

It is not a good idea to be moving your money around and making huge purchases if you intend to buy a new home in the near future; like in the next three to six months. The best thing that you can do and will probably boost your chances of getting a mortgage for your new home is to stop moving your money. You should even stop making any large transactions before the home buying process. Lenders will look at your credit profile, and they want to see proof that you are reliable and will get back the money they lend you in good time.

2. Get a pre-approval for your home loan

You need to realize that getting pre-qualified for a loan does not guarantee that you have qualified to get a loan. You also need to be pre-approved by the lender. A loan pre-qualification simply means that the lender has looked at your loan request, considering your documentation and other relevant forms, and decided the amount of money they can loan out to you. A pre-approval is what you need to be looking for as they can save you a lot of time that could have, otherwise, been spent looking up houses way beyond your league.

3. Avoid any border dispute

You need to ensure that you get a surveyor to identify the borders of the home that you want to purchase before you do the actual purchasing. This can save you a lot of unnecessary disputes over property borders in the future if supposedly you or your neighbors overlap onto the other person’s property.

4. Never time the market

It is virtually almost impossible to time the markets. The best time that you can buy a home is that time that you find one that you feel suits your needs, and you have the funds to pay for it.

5. Bigger is not always better

No matter how enticing the deal may be to go for the biggest and most beautiful house, it will probably not be the best deal for you. Bigger houses are tough to sell, and you never know, you may want to put the house up for a resale some day and end up stuck with it. It may even be a good idea to go for the worst home around the block as these houses are the ones that appreciate the fastest. They trade for more when compared to the bigger houses.

Are you in the market to purchase a home in Mission Viejo, Coto de Caza, or Rancho Santa Margarita? Click here to talk to the Kovacs Connection Team today!

Everything You Need to Know About a Closing Disclosure Form

Posted on | by Cuselleration

A closing disclosure form outlines the terms and costs that you incur in your mortgage. It is among the important pieces of documents that you must always check before you decide to close on a home.

The lender must it the closing disclosure form available at least three business days before any closing deal is met. You need to ensure you read this document thoroughly before you come to any agreement and sign any paperwork.

Closing disclosure vs settlement statement

The closing disclosure form was known as the HUD-1 settlement statement before August 1st, 2015. In the past, it used to be a very long and confusing document that was only available to the buyer on the day of closing, as required by federal law. This did not give the buyer much time to address issues within the document. It is for this reason that the closing disclosure statement form later replaced the settlement statement. And new and a fewer number of strict laws were implemented in the form, such as lenders providing the five-page document three business days before the closing date.

Even so, this document can still be a little confusing. Here are some few tips you can look at to make the process easier for you.

Comparing your closing disclosure with your loan estimate

You will always want to compare the amount you use with the amount that is in your loan estimate. The numbers and terms should match up or come close in both forms. You may realize that there are some changes as a result of the period that has gone by from the time you applied for a loan.

Your mortgage rates may have changed over the time too, and the attorneys or the title company changed their rates as well, most likely nudging the rates up. What you will especially want to keep an eye out for are the spelling errors and typos that can occur in numbers and names.

A study showed that half of the real estate agents have, at one point, found errors in closing disclosure statements. So, to be on the safe side, it wouldn’t hurt to check for any misspelling and typo errors. In fact, you may end up saving yourself a lot of trouble in future. Wherever you don’t understand the document, it is advisable that you seek the advice of your real estate agent. It is vital that you notify your closing company, lender and title of any changes that may be troubling you immediately.

What to check in your closure disclosure form

  • Your name – check the spelling of your name
  • Loan term – this is always somewhere between 15 and 30 years.
  • Loan type – know the type of loan you should go for
  • Interest rate – locked in rates will always remain fixed
  • Closing costs – these are the fees that are paid to the third parties that took part in the process to close the deal

Are you in the market to purchase a home in Rancho Santa Margarita, Coto de Caza, or Mission Viejo? Click here to talk to the Kovacs Connection Team today!
Tags: buying, cash flow, closings, first time home buyer, home buyer, home buying, homes, real estate, South Orange County

How to Change Jobs and Get a Mortgage at the Same Time

Posted on | by Cuselleration

One of the most challenging tasks you may end up with at one or two points in your life is when you have to change jobs and aim to get a mortgage at the same time. It is a fact that whenever you change from one job to another, you are likely going to affect your loan approvals. Even if you are shifting from one job to another with an equal or possibly higher income, you will notice some minimal shift in your loan approval status. What lenders are most interested in, however, is whether or not you can pay back the loan. You need to ensure that you consider how that new job can affect your mortgage acquisition.

What to expect when you are changing jobs before you get a mortgage

Lenders will most likely not have any concern if you are shifting to another job that will probably earn you more income than your previous one. You may have gotten a promotion or moved to another better department; all of these are always looked at favorably.

Before you can earn a loan approval, however, you will have to work in your new job for at least 30 days, and also should be able to prove to the lenders the longevity of your stay in your new role before you can get loan approval.

How you can get a mortgage with your new job

You need to steer clear of any jobs that will not make any financial sense if you move to it. Why should you move from a full-time job to be a contractor? Or from a well-paying job to an equally lateral or even less paying job? There is simply no sense in that. When you are one person who has an employment history of moving from one job to another, you may harm your chances of getting a loan as lenders can view this as some red flag, that you may have problems maintaining a steady income.

You also need to cover long employment history gaps. You will have a better chance of acquiring a mortgage if your unemployment period is six months or less.

How do you get that home loan when you are relocating?

If that new job you are about to embark on requires you to relocate, then you need to make sure that you have made all the living arrangements before you move. You may even decide to stay in a rental for the first 30 days in your new job so you can provide the lenders with that first pay stub. That may be the solution you can use without having to stress yourself out too much. This way, you are also learning about the new area’s real estate market and what can be best for you when you are ready to make that move.

You can also decide to purchase a home in the new location before you choose to give notice to your current job. This can ensure you have a smooth move to your new location.

Are you in the market to purchase a home in Rancho Santa Margarita, Coto de Caza, or Mission Viejo? Click here to talk to the Ryan Grant Team today!