Deed vs. Title in Orange County

When a couple purchases a house, whose name gets written on the title and whose name goes on the mortgage deed? For most homebuyers, the simple answer will be that both names go on both documents. But there are always exceptions with good reason. Here are a few things to know about this complex topic before you buy a home.

What’s the Difference Between Title and Mortgage

It is worth clarifying for the uninitiated that a property title and mortgage deed are not the same thing. The term “title” particularly refers to the rights of ownership. A title grants an individual or individuals exclusive possession, use and transfer of ownership rights for a given real estate property. A mortgage, called a “deed of trust” in some states, pledges real property to secure the loan.

Just over half of home buyers will use a home loan to purchase their home. This means that they will have both a title and a mortgage. For these people, a decision will need to be made about whose name gets written on the title and the mortgage. Since both documents are not the same, this answer for each could vary.

Leaving Your Spouse Off the Mortgage

There may be a good reason to apply for a mortgage under only one name for some couples. Mortgage lenders usually apply a minimum FICO rule. This is when the credit score used to judge the mortgage application is the middle-lower score of the two applicants. If one person has bad credit, it could affect the interest rate they qualify for and lead to higher costs.

A short or unusual work history is a common reason some couples go with a joint mortgage application. Most lenders have “2/2/2” documentation requirements. This is two years of tax returns, two years of W2 income statements and two months of bank statements.

Saving Money by Applying for a Loan By Yourself

The Washington Post recently reported on a twelve-year study by the Federal Reserve that found many couples were leaving money on the table by applying jointly when one spouse could have qualified for the mortgage alone, and the results were striking.

Out of more than six hundred thousand conventional loans issued between 2003 and 2015, ten percent could have qualified for a lower interest rate by having the better-qualified buyer apply alone.Nearly ten percent of prime borrowers who applied for their loans jointly could have lowered their mortgage interest rate at least one-eighth of one percentage point if the mortgage was applied for by the applicant with a higher credit score and an income high enough to qualify for the mortgage loan. Federal economists revealed that a further twenty-five percent of borrowers could have significantly reduced the cost of their home loan by having the more qualified borrower apply singly.

How Both Names Could Be on the Title and Not the Mortgage

The same Washington Post article noted that many couples applying for a home loan have strong feelings about applying jointly for their mortgage loan. While the couple is purchasing the house together, there is a feeling of joint ownership that is important to them, even though both individuals could be on the legal title to the house without both being on the mortgage. This arrangement is also available to both married and unmarried couples.

But how can this be? A mortgage deed involves an agreement to pay back the loan amount borrowed to buy the home. But the title is a separate matter of ownership entirely.

Issues Raised by Deed and Title Assignment

Divorce is a common issue for houses with a joint mortgage or title. If a house is paid for, lawyers will usually look for a way to divide up the assets. This oftentimes gets accomplished through a quitclaim deed, where one party gives their ownership rights over to the former spouse. If there is a mortgage loan on the home, lawyers then look at ways to divide liabilities. The party who remains in the house will often refinance the loan individually before the other party cedes ownership through a quitclaim.

Another common question is what happens to a title and mortgage loan when one spouse dies. As with most matters in real estate, it oftentimes depends on the location. The laws governing property transfer upon death and inheritance are largely chosen at the state level and not all states agree on the best way to go about it.

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!

How to Prepare to Buy an Orange County Home in 2018

The home-buying process is extensive and could be overwhelming. This is especially true for new homeowners who don’t do their homework.

If you are in the market to buy a home next year, now is the time to start preparing. We are here to help!

Getting Pre-Approved

The moment you choose to buy a house, work with a mortgage lender to get pre-approved for a mortgage loan. Knowing how much you qualify for will narrow down your options and direct your research.

But do not overextend yourself. Just because you qualify for a two hundred fifty thousand dollar loan, this does not mean your house should cost two hundred fifty thousand dollars. You need to consider other expenses such as taxes, interest payments and homeowners insurance.

Prioritize Your Top Priorities

After you have an idea of how much you would like to spend, make a decision on the lifestyle that suits you and your family. You should consider factors like proximity to shopping and entertainment, great schools and how much land you would like. Deciding what is most important to you will help further focus your search.

Start Saving Money

Most mortgage lenders require a down payment towards your mortgage loan, which could be up to twenty percent. If you do not have enough money at your disposal, you can save for a bit longer or perhaps borrow against your IRA or retirement account.

Despite how you come up with the initial deposit, make sure you can prove the source of the funds. Lenders will not accept cash payments and if your down payment was a gift from a generous giver, be prepared to bring a gift letter.

Count the Cost

You need to also be prepared for other out-of-pocket expenses during the home buying process. You will need money for things like closing costs and home inspections before your close, appliances, furniture and utilities afterwards. Do your homework to understand how much money you will be paying upfront and save accordingly.

Credit Matters

You need to be extra careful with your credit during this process. Review your credit report and make sure there are no inaccuracies. Don’t open new credit accounts and make major purchases. Several inquiries could negatively impact your credit score. This can impact your loan decision and your interest rate.

Hire a Pro

When it comes to finding your dream house, you shouldn’t have to go at it alone. A qualified real estate agent is familiar with the ever-changing real estate market and can guide you through the process. This includes contract negotiations.

A mortgage lender can help you make a wise choices based your monthly budget and lifestyle needs. They also share tricks and tips with you along the way to save you time and money.

Clean House

When you find the perfect home, you will be moving in a matter of weeks. Take the time early in the process to get rid of items you do not want to bring with you. Starting this early on will make it easier to pack when the time comes.

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

Loan Prequalification vs. Loan Pre Approval in Orange County

You are finally ready to make the move into homeownership. From all of the online searching you have done, you know that you need to get a “pre-something” to prove you are a serious home buyer. But which is it: preapproved or prequalified? These both sound good, but they have different purposes.

Getting preapproved

The preapproval process is like a test drive before you submit your formal application for a mortgage. The loan officer and an underwriter will verify the figures, facts and your credit history. This process could help pinpoint things you may want to improve or errors that you will want to correct before entering the formal application review process. A loan officer will also start looking for mortgage programs that might apply to your financial situation. The preapproval process is more precise because it is fully underwritten and helps ensure your home buying process will go smoothly.

In addition to ordering your credit report, a loan officer may ask for copies of last year’s W-2s, brokerage, savings account statements, current pay stubs and your credit history..

Getting prequalified

When you ask a loan officer to do a prequalification, it can be done online, in-person or by phone. They will verbally ask you to share information on your income, assets, credit and the amount of debt you owe.

It’s a conversation that helps establish some financial parameters before you make offers on properties and helps you find the ideal price range when starting your search.

The process is useful for first-time buyers and is not rigorous enough to distinguish you from the other attendees at an open house or when you request a showing. The reason is that the letter is based off something similar to a best guess by a loan officer. It’s not reviewed by an underwriter and doesn’t address what to expect in regards to the type of mortgage needed to buy a home.

Your monthly bills

When you are preapproved, you will receive a letter to share with real estate agents and home sellers. After you have an offer accepted on a home, you will still need to formally apply for a mortgage. This review process will involve a deeper dive into the information you have already given. Having a pre-approval letter also means faster service and turn times to get you into your house sooner. The official mortgage application is more likely to be easier than with just a prequalification.

Why should you bother getting prequalified?

The prequalification process does not take a lot of time or effort on your part. Any cost is usually limited to that of requesting a credit report. When you already have an idea of the South Orange County area you want to look in and the type of home you can afford, skipping the prequalification step could make sense. It is a preliminary step for those who need a starting point.

In comparison, for most buyers, a pre-approval is a step that they should not skip. Obtaining a letter from a lender that states you are preapproved can be especially helpful in neighborhoods where the existing home inventory is tight and when the home you are looking at is perfect. Being pre-approved makes it easier for the seller to accept your offer over that of a buyer that has not taken this extra step.

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