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!

Can You Pay your Mortgage Using Bitcoins?

Bitcoins are all the rage right now and are changing the way people think about money. But can you pay your mortgage using this new digital currency? Find out below!

If you are looking to buy a house, there are a number of financial assets that could help you qualify for a mortgage including your current home, cash in savings and checking, retirement accounts and other investments. But what if you have assets that include bitcoins? While the cryptocurrency was recently labelled as an asset by the Internal Revenue Service, most lenders remain wary about how to value and accept this new digital currency.

Bitcoins as Assets

Bitcoin has been around for about eight years. It could be used in the mortgage transaction just like any other form of money. But there are a few problems. What is one Bitcoin worth? Will anybody accept them?

Let’s start with the worth of a Bitcoin. We would treat it like any other foreign currency. It would need to be converted in terms of value if not in terms of actual conversion to United States dollars. The good news is that there are exchanges for them. One Bitcoin was worth $16,490 on December 14, 2017 3:29pm PST.

Until more consistent rules are put into place, here are some ways you may be able to use Bitcoin during the mortgage process.

To pay closing costs and fees: A Manhattan mortgage provider made history in late 2013 when it became the first firm to accept bitcoins for real estate closing costs and fees. While this is an exciting milestone for the cryptocurrency, the trend has yet to catch on with most lenders. And do not expect to be able to make your mortgage payment in bitcoins because most experts think that is a long way off.

Use bitcoins as an asset on your mortgage application: Valuing bitcoin on a mortgage application is new territory for most mortgage lenders, so you might struggle to find one who will take this asset into consideration. But there is anecdotal evidence that a handful of mortgage providers are becoming more bitcoin-friendly. Just like all assets used to qualify for a mortgage, you will need to verify the value of the bitcoins you hold and submit proper and often extensive documentation to your mortgage provider.

Use bitcoins for proper documentation of transactions in a bank account: Even if you don’t plan on using your bitcoins to boost your assets when you apply for a mortgage, your mortgage provider may still request documentation for any large transactions in and out of your bank account. Your mortgage provider would want to confirm how that money entered your bank account if you cashed out a large amount of bitcoins to use for a down payment. This is similar to accounting for large cash gifts. Mortgage providers need to be sure you have not borrowed money from somewhere else to boost your liquid assets. For this reason, you should be prepared with a record of your bitcoin-to-bank-account transaction history.

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!

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!

What Makes a Property’s Value Rise and Fall in Orange County?

In today’s Orange County housing market, buyers and sellers alike try to understand the concept of home value appreciation.

The value of your home may appreciate over time, unlike the purchase of a car which depreciates when you drive it off the lot. Appreciation is based on a few factors.

Location is as important as the home

It’s all about the location, location, location! You have heard this before. Where you buy your home may be the most important and controllable factor to appreciation. If value increase is important to you, make sure to give thought to where you buy.

Ask yourself these questions when buying as it relates to location. Is the house close to major highways? Are there good schools nearby? Is the home conveniently located to entertainment and shopping? Does it have a nice view?

Investing in a desirable location may contribute to equity in your home down the line and can mean more money in your pocket if you decide to sell.

Acres and land accumulate

Another factor to consider is how much you buy. We are talking land, not the physical structure of your house. Think about supply and demand. Land is a precious commodity in Orange County and we are not getting any more of it. As the Earth’s population increases, so does the need for land.

If your budget does not allow for both a big, gorgeous home with a considerable piece of land, you might wish to consider opting for a more conservative home and keep the land.

The benefit of upkeep

Take care of your house. While it may not be as huge a factor as the location and land itself, having a well-maintained house with attractive details and modern amenities might increase the equity of your home. It will also help it sell faster when you are ready. Separate your home from the rest with our home selling tips here!

The external effects

It’s smart to give thought to how your home will appreciate. The reality is that appreciation rates vary based on factors beyond the control of the homebuyer.

The local, national and global economy affects the real estate market. This affects what your home is worth at any given time. To put it simply, the more people could afford to buy homes, the greater the demand becomes for homes. This makes home values rise.

Move fast! Timing is everything

If you are shopping for a house right now, you know that it is a seller’s market. In some locations in Orange County, a house could be under contract within days or hours. This trend has had a positive impact on home values across the nation.

In May of this year, Zillow has reported a national home value index of $199,200. This is an increase of .5% from April this year and 7.4% from last year. To put it simply, sellers have a great chance of getting the most bang for their real estate buck in the current market.

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!

7 Mortgage Facts You Should Know

The seven mortgage facts below will give you an advantage when shopping for a home or refinancing an existing loan.

1. Mortgage rates are always changing

Similar to the stock market, mortgage rates are changing throughout the day. Mortgage rates you see today might not be available tomorrow. If you are in need of a mortgage loan, make sure to check the current rates being offered by lenders. If you have already done your research and have found your dream house, you should consider locking in your rate as soon as possible.

2. Different mortgage lenders charge different fees

Don’t expect all lenders to charge the same fees for a mortgage loan. Each lender structures their fees differently. The next time you apply for a mortgage loan pay close attention to the rates, closing costs and points being charged.

3. Lenders could sell your loan to another bank

Most home buyers have experience getting a mortgage loan with a certain lender only to find out that the loan has been sold to another bank. This happens because lenders need to free up their liabilities in order to make room to give out more loans. However, it doesn’t affect your mortgage whatsoever and it’s important to pay close attention to your mortgage statement and any correspondence you receive in the mail to make sure you don’t make payments to the wrong bank.

4. Your middle credit score

When you’re applying for a mortgage loan, the lender will pull your credit scores from Transunion, Experian and Equifax to assist them in determining your credit. Your middle score of the three is what lenders will use to qualify for a loan. But the underwriter will review all three scores as part of the loan underwriting process. If you pull your own credit score through an online website, the credit scores displayed to you might be different than what lenders use because they use different credit reporting systems.

5. It’s possible to have a low down payment for a mortgage

You don’t necessarily have to come up with a 20% down payment to get a mortgage loan. You can get an FHA mortgage loan with a 3.5% down payment. The VA and USDA loans require no money down. VA loans are used for military veterans and their families. USDA loan are usually used for farming or rural properties.

You should take note that many lenders will require some type of mortgage insurance for loans that have less than a 20% down payment on a purchase loan or less than 20% equity available on a refinance.

6. You could refinance your home loan anytime

You’re allowed to refinance your mortgage at anytime, but this doesn’t necessarily mean you should. Think about why you would like to refinance. Is it because you want to lower your monthly payments, to take cash out from your equity, or to change the type of loan you are in? Make sure your reason makes financial sense.

7. You could get a mortgage loan after a foreclosure

Most homeowners have experienced a foreclosure after the recent mortgage crisis. There’s good news for these borrowers because they could obtain a mortgage loan after foreclosure. But there are waiting periods involved. For instance, to apply for an FHA loan you need to wait three years after foreclosure to apply. If you would like to get a conventional loan, you will need to wait seven years from foreclosure. For those who would like a VA loan, the waiting period is two years.
Do you have a mortgage question? Click here to contact our partners at the Ryan Grant Team today! And if you’re ready to start searching homes let us know!