Mortgage and Financing Options
The first question that usually comes from someone looking to buy a home involves wanting to know how much of a mortgage they qualify for their potential new residence. My first question to the potential buyer(s) is how much they can afford to pay monthly. What someone can qualify for compared to what they can afford to pay usually are two different numbers. At NewDeck, while our goal is to help you get your dream home, we would never want to put someone into a property where they struggle to make the mortgage payment.
It’s our honest and straightforward approach to home loans that sets us apart from the competition. The majority of our business comes from past referrals, which is why we treat all of our clients like family.
There are three things we look at to establish a possible rate and program:
- Loan to Value
- Credit Score(s)
- Type of property you are looking to purchase or refinance.
Credit scores will be the first thing look at for loan qualification. The higher the credit score, the lower the risk. The same goes for the loan to value. A larger down payment means less risk for the investor. FHA financing offers many features that other loans do not, (3.5% down) but can be more of a “risk” to the investor, (insured by the government), but usually more costly to the consumer.
The type of property also has risk factors. Non-owner properties seem to have the highest risk. Second homes are certainly riskier than primary properties, thus primary residences are usually safer for the investors with a better interest rate and or fees.
Buying a Property
We regularly get all sorts of questions in regards to purchasing a property. Below is an example of the stark difference that can be seen with only a slight increase in interest rates;
Two families make the same money and have similar credit scores. Both qualify for a $3,375.00 payment before property taxes and homeowners insurance.
Family A buys a home now for $1,000,000 and gets a mortgage of $800,000.
The principal & interest payment should be around $3,375.00 based on an interest rate of 3% over 30 years.
Family B decides to wait to see what happens to real estate prices after government intervention (forbearance, foreclosure freeze, and all the other government perks going around) comes to a stop. Let’s say next year, Family B can still afford the $3,375.00 monthly payment, and there is a higher inventory of homes available that had previously been held up by the Covid-19 Cares Act, government rules, and delayed foreclosures.
Say that rates are 5% percent next year, which would be about a two-point difference from now, but not a stretch with the high possibility of inflation. Family B can now only afford a mortgage of about $628,000, assuming rates are five percent over the same 30 year period. That’s a $171,000 reduction in purchasing power!
*Things to take into consideration:
- There will be millions of loans coming out of forbearance this year.
- There will be people who lose their job perminantely.
- There will be people who will be finalizing their divorce.
- Foreclosures will likely return with a vengeance.
The above example shows how important it is for rates to stay low to keep prices where they are. Mortgage rates remind me of the cost of gasoline and other fuels. Prices skyrocket up but are typically slow to come down.
Selling A Property
One of the first things that I hear from many brokers is “We only charge 1%.” Another good one is that they will buy your home, and close your escrow in five days!! I had a few clients who were curious to look in that direction. As they discovered, if someone offers to buy without even looking at your home, the general offer is about 70% of the true value of the property.
The moral of this story is that it’s not what you are paying for in commissions, etc., it comes down to the bottom line…what you net out of the sale of your property. There are companies that will list your home for as low as $99.00. Now if you have little experience in Real Estate, things can get messy if something goes wrong.
As a full-service broker, we “do our homework” on your potential buyers in regards to motive before you sign on the dotted line. For example, a potential buyer with relatives that live close to your property is less likely to counter your initial sales price than someone looking to purchase an investment property. That little bit of research can lead to you getting a much fairer price for your home, and can also help you significantly reduce time in escrow!
One last thing…I have been a CA Real Estate Broker for 32 years and have bought and sold several properties for myself. I have never once represented myself in any of my transactions. An owner/seller can become “blind” to a property that they own. You need honest answers to your property questions and saleability.
The above materials have not been approved or endorsed by FHA or any other government agency. NewDeck Capital Corp., dba NewDeck Capital Lending is in no way affiliated with your current lender. Rates, Programs, Guidelines, and Fees are subject to change without notice. Restrictions apply, and not all will qualify. This is not in any way a commitment to lend. Equal Housing Opportunity. NewDeck Capital Lending is licensed to conduct business only in California. Newdeck Capital Lending. 7040 Avenida Encinas Suite 104. Carlsbad, CA 92011
Licensed CA Department of Real Estate. Broker #02105808 NMLS#1960626
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