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Keeping up with the latest mortgage trends

Home Appraisal Tips to Maximize Home Value 2

There are several things sellers can do to pump up the value of their home. The best advice is to be prepared before the appraisal takes place. Tips for increasing the value of your home include:

  • Vetting the Competition:  Research what homes are selling for in your area. You can access public property records through sites such as ‘Open Listings.’ Look at homes that are similar to yours that have sold in the last six months. Stay within a few miles radius of your home and look for homes with comparable square footage, layout, upgrades and condition.
  • Completing Minor Repairs and Fixes:  If you have a list of projects that need to be finished, do them now. These may be a running toilet flush, a squeaky door or a non-working garbage disposal. Although these are small details, they add up to the overall condition of your home. Take a tour around your home with a pad and pencil and take note of needed repairs.
  • Improving the Look of the Outside:  Your home’s exterior plays an important part in assessing its value. Always think of your home’s curb appeal. Repair any loose roof shingles or clogged gutters. Make sure the pathway to the garage and front door are clutter-free and well-lit. Make sure your lawn is mowed the day before the appraiser is due to arrive and think about adding some decorative finishes to your doorway.
  • Making Cosmetic Upgrades:  There is always the possibility that if you invest a lot of money into remodeling your home, you may not recoup your investment in added value. However, smaller cosmetic upgrades are always worth the effort. You can add a fresh coat of paint, replace a damaged bathroom vanity and get newer fixtures with little money or effort. With a small investment of time, your home will get a new and updated look.
  • Documenting the Improvements:  Make a note of all the improvements you have done over the years and make a list of any big upgrades and the dates they were done. Save the paperwork from the upgrades as it helps to validate your statements as well as help the appraiser assess the quality of work that was done.
  • Cleaning Your Home Thoroughly:  Generally, a clean house will rank higher in terms of overall condition than a home that appears dirty.
  • Giving Your Appraiser Space:  You may be tempted to give him or her a tour of your home and point out all the improvements you have made. Resist this impulse as professional appraisers do this every day and know what to look for. If you follow them around, you may run the risk of annoying them or revealing too much about the home. Be polite and cordial and available to answer any questions they may have during, or at the end, of the appraisal.

At Superior Mortgage Company, Inc., we specialize in residential and commercial loans and provide the best products and services available. Whether you are purchasing, refinancing or in need of a home equity loan, and regardless of any credit problems, we can help you. Contact the company with the answers you need. Please call us at 845-883-8200. We look forward to hearing from you.

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Home Construction Loans

Many people dream of building a brand new home to their exact specifications. However, home development is complicated and challenging if you need to get a loan to pay for it.

A construction loan is usually a short-term, interim loan necessary to pay for building a house. As work on the home progresses, the lender pays out money in stages. The short term usually has a maximum of one year with variable rates that go up and down depending upon the prime rate. The loans rates are higher than typical permanent mortgage loans. To get approval for the loan, the lender will review the construction timetable, detailed plans and a realistic budget. When approved, the borrower will be put on a bank draft schedule that coincides with the project’s construction stages and will only make interest payments during construction. There are two main types of construction loans, including:

  • Construction to Permanent Loan – After borrowing to pay for the construction costs to build your home and you move in, the loan is converted into a permanent mortgage, making it a two-in-one loan. The borrower then has only one set of closing costs to pay. During the construction phase, you pay interest on the outstanding balance on a variable interest rate which fluctuates up and down. With a permanent mortgage and a possible loan term of 15 to 30 years, the payment covers a fixed or variable interest rate as well as the principal amount.
  • Construction Only Loan – These are two separate loans; one for the home’s construction, which is usually a year or less, and a mortgage loan to pay off the construction. With this type of loan, your down payment can be smaller. This is a good option for people that own a home and are building another home. Although cash is temporarily limited in the present, once the home sells there will be more money to pay the mortgage on the completed house. You have two separate sets of fees for these loans and if your financial situation becomes unstable, you may have difficulty qualifying for it.

Qualify for a home construction loan may be more difficult than qualifying for a traditional mortgage. With traditional mortgages, your home is your collateral, meaning that the bank can seize your home if you default. In a home construction loan, the bank cannot do this so their risk is much bigger. To offset the risk, there are more stringent requirements to get the loan, including good to excellent credit, a stable income, a low debt-to-income ratio and a 20% down payment. Your lender may want detailed information about the lot, house size, materials used and which contractors will be working on the house.

If you want to build a new home, the road ahead may be challenging. The more you know, the easier the challenges. All the more reason to work with Superior Mortgage Co., Inc. We specialize in residential and commercial loans, will answer all your questions and proudly provide the best products and services available.  Whether you want to purchase, refinance or take advantage of a home equity loan, we can help. Contact us at 845-883-8200.    

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Reverse Mortgages

If you are 62 years of age or older and need money to pay off your mortgage, supplement your income or pay for your healthcare expenses, you may be interested in a reverse mortgage. This type of mortgage allows you to convert part of the equity in your home into cash without having to sell your home or pay any additional monthly bills. However, a reverse mortgage may use up the equity in your home which will mean less money and assets for your heirs. As with all loan programs, the more you know, the better decision you will make.

When you have a regular mortgage, you pay the lender every month to buy your home over time. In a reverse mortgage, you get a loan where the lender pays you. Reverse mortgages take part of the equity in your home and convert it into payments to you. The money you get is usually tax-free and does not affect your Social Security or Medicare benefits. Generally, you don’t have to pay back the money for as long as you live in your home. When you die, sell your home or move out, you, your spouse or your estate would pay back the loan. This could mean selling the home to repay the loan. There are three basic types of reverse mortgages but regardless of what kind you are interested in, you are borrowing against the equity in your home.

There are many factors to consider when deciding on a reverse mortgage. These include:

  • Other fees and costs: Lender usually charge an origination fee, other closing costs and servicing fees over the life of the mortgage. There may also be mortgage insurance premiums for federally insured loans.
  • You will owe more over time: As you get money through the reverse mortgage, interest is added onto the balance you owe each month.
  • Interest rates change over time: Most reverse mortgages have variable rates which change with the market. Some reverse mortgages offer fixed rates but may require you to take your loan as a lump sum at closing.
  • Interest is not tax deductible each year and is not tax deductible on income tax returns until the loan is paid off partially or in full.
  • There are other costs related to your home: Because you keep the title to your home, you continue to be responsible for property taxes, insurance, utilities, fuel, maintenance and other expenses. Your lender could require you to set aside a specific amount of money to pay your taxes and insurance during the loan. This amount reduces the funds you get in your payments.
  • When you are married and in certain situations, your spouse may continue to live in the home even after you die if he or she continues to pay taxes and insurance and maintains the property.
  • If you want to leave your assets to your heirs, a reserve mortgage may not be for you since this type of mortgage can use up the equity in your home.

At Superior Mortgage Company, Inc., we specialize in residential and commercial loans and provide the best products and services available. If you are purchasing, refinancing or in need of a home equity loan or reverse mortgage, and regardless of any credit problems, we can help you. Contact the company that can answer all your questions. Call us at 845-883-8200. 

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How Does a Loan Originator Help You Get the Best Loan?

A loan originator can provide valuable advice, identify the loan program that perfectly fits your needs and help you get a lower rate. The originator works with borrowers to evaluate different loan programs to make sure the loan gets funded. They will find the best programs to match the borrower’s particular situation and guide them through the process, gather the information necessary to close the loan, verify the information and coordinate if any questions come up during the underwriting process.

Loan originators learn what your needs and circumstances are by asking the right questions. They will want to know about your employment situation, work history, bonus income and other factors. They will ask questions about the property you are buying. If you have numerous loan programs you can choose from, a skilled originator will look at your credit history, the size of the down payment you want to make, where you are currently living and the type of property you are buying, whether you are or have been a servicemember and your existing debt and monthly payments. Ultimately, you will make the final decision as your best option depends on your situation and your preferences.

A good loan originator will help you move ahead with the loan knowing exactly what your monthly payment, interest costs and insurance costs look like for the property you are borrowing against. For example, government programs such as FHA loans allow for down payments as low as 3.5%. However, a down payment that low requires that you pay a monthly mortgage insurance premium for the life of the loan. On a thirty year loan, the insurance costs can add up. Other more conventional programs allow you to make a similar down payment, so you will still have to pay private mortgage insurance, but you can cancel the insurance once you build sufficient equity in your home.

It is a good idea to shop around for a company with the experience and resources to offer you the best programs to fit your needs. Since terminology and titles may be confusing, always ask any potential lender how they conduct their business. Remember that there are no unimportant questions and never feel embarrassed about asking the lender to repeat or explain their answer more than once. Legitimate mortgage companies such as Superior MCI work with their clients to give them the knowledge they need to make the best decisions. We treat your inquiries seriously and we are proactive in keeping you informed throughout the entire application process. Our team is helpful, reliable and honest so that you are aware of all the benefits and pitfalls of the program you are choosing.

At Superior Mortgage Company, Inc., we specialize in residential and commercial loans and provide the best products and services available. If you are purchasing, refinancing or in need of a home equity loan, and regardless of credit problems, we can help you. Contact the company that has all the answers to your questions and can give you the information you need to make the best decision. Call us at 845-883-8200. 

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Are Credit Scores Used When Applying for a Loan?

A credit score is a number that lenders use to determine what the risk is if they decide to lend you money. It is how credit card companies, banks and other financial institutions assess whether you can or will be able to pay off your debts. Accordingly, the higher the score, the better the likelihood that you are able to pay off any loans you take out. There are three different credit bureaus that independently calculate your score including Equifax, Transunion and Experian. Although they use similar processes to determine your score, each bureau may have different information about your credit history. It’s a good idea to check each one to make sure all the information is correct. In the US, the credit scoring system you will hear about is the FICO score, which can be anywhere between 300 and 850. Generally, lenders refer to the range of scores as:

  • Poor credit:  a FICO score under 630
  • Average or fair credit:  a Fico score between 630 and 690
  • Good credit:  a Fico score between 690 and 720
  • Excellent credit:  a Fico score above 720

The components of your credit score has seven categories, including:

  • Payment History:  Your payment history is the largest single component of your FICO score. It is a track record of all the things you have done incorrectly when it comes to your credit and how you behave as it relates to your debts.
  • Late Payments:  Regardless of whether you forgot or were struggling to make ends meet, being late on a monthly payment for a credit card or loan will cause a negative adjustment on your credit score.
  • Debt Burden or Accounts Owed:  This includes how much you owe in total, the types of loans you have and other quantitative indicators about your overall debt and credit profile. It is considered in relation to your payment history and other factors.
  • Credit Utilization (Debt to Limit ratio):  This is a measure of the total amount of the debt on your credit cards against the total limit allowed on those accounts. A lower credit utilization means that your average balance is lower relative to the total amount you could have on your cards which is better for your score. Requesting a higher credit limit on existing credit cards may help your credit score since it will lower the overall ratio.
  • Length of Credit History:  The older your accounts and overall credit history, the larger the time frame a company can accurately judge your finances and behavior toward credit.
  • Types of Credit:  Your FICO score takes into account the different types of debt or credit used. You may have revolving credit like credit cards, mortgages, consumer finances or installment loans. A history of exposure to different types of credit indicates that a consumer is familiar with different financial products and can manage them effectively.
  • Recent Credit Searches:  Searches or hard inquiries made into your credit profile based on the number of times lenders have requested your data can drag your score down.

At Superior Mortgage Company, Inc., we specialize in residential and commercial loans and provide the best products and services available. Whether you are purchasing, refinancing or in need of a home equity loan, and regardless of any credit problems, we can help you. Contact the company that can answer all your questions. Call us at 845-883-8200. 

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Getting a Loan to Flip a House

Turn on the TV and you might find several programs devoted to flipping houses. However, flipping houses in real life is not as easy as it looks on TV. Although it has become more popular in recent years and rising home prices make it more attractive to investors, flipping houses is not always profitable and can cost an investor a lot of money by the time the house actually sells. Flipping houses, also referred to as wholesale real estate investment strategy, is a real estate investment strategy where an investor purchases a property not to use, but to sell for a profit. Many house flippers will tell you that sometimes the hardest part is getting the money necessary to make capital improvements in the house and to be able to continue flipping with more houses. If you are intrigued by the idea of making money from flipping houses, there are choices for home buyers.

A home equity line of credit (HELOC) may be a good way to get started. If you have sufficient equity in your home, you may want to use it to buy another property to flip. Every lender has different rules regarding how much they will lend and the rates may be a bit higher than normal mortgage rates. It is important to remember that using your home as collateral is risky if something does not go right in the process.

You can also borrow money from a lender or bank for an investment property. You may have to put down 20 percent or even higher, but it will be the least expensive money you can borrow at around 4 percent. You may need a higher credit score and some money on hand to buy an investment property in this way. You can also go to a private lender for the money. The private lender can be a parent, wealthy relative, non-bank company or a person able to lend the money. The money is secured by a note and deed of trust for the purpose of funding a real estate transaction. This would cut out the need for appraisals and other costly add-ons that increase the cost of a normal home loan. You may find better interest rates and terms with a private lender, but keep in mind that involving friends and family in business pursuits does not always work out well. 

Before you commit to any lender, understand the flipping process. To do this successfully, find a mentor. Speak with people who have done it successfully, and unsuccessfully, so you understand all the ins and outs, the pitfalls and everything you must watch out for. Remember that you never really know what you’re going to find in the home you want to flip. The process can be long and difficult. Do your research and find out everything you need to know before embarking on this type of project. Skills, knowledge, patience, time and money will help you get through any real estate strategy you use to increase your income.

At Superior Mortgage Company, Inc., we specialize in residential and commercial loans and provide the best products and services available. If you are purchasing, refinancing or in need of a home equity loan or reverse mortgage, and regardless of any credit problems, we can help you. Contact the company that can answer all your questions. Call us at 845-883-8200. 

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Private Mortgage Insurance

Most lenders recommend that when buying a home, a 20 percent down payment is recommended. Down payments can be as low as 3 percent in some cases, but a low down payment will result in the need for private mortgage insurance (PMI). This type of insurance may be required to pay for if you get a conventional home loan.

Lenders require PMI as a part of a conventional loan to protect themselves in case your home is foreclosed upon. The insurance protects the lender for some of the shortfall if a home is foreclosed upon and sold for less than the outstanding part of the mortgage. It is usually required if you refinance a mortgage with less than 20 percent equity. PMI can help you qualify for a mortgage if you do not have enough cash for a 20 percent down payment. Although PMI can protect the lender, it is an added expense to the borrower. Once you reach 20 percent equity in your home through paying your loan balance down over time or through rising home values, you can contact your lender and ask them to remove the PMI from your mortgage. A few ways to avoid paying PMI are:

  • Put 20 percent down if it is at all possible. The higher the down payment, the better the terms of the mortgage repayment plan.
  • Loans that are backed by the US Dept. of Veterans Affairs or the US Dept. of Agriculture do not require PMI. FHA loans come with two types of PMI premiums that are paid in the beginning as well as annually.
  • Even if you must get PMI, you can always cancel it later. If you are already paying the premium, keep track of the loan balance and the home prices in your area. Once the balance reaches 80 percent of the home’s value, you can request that the lender drop the mortgage insurance premiums.

The average annual PMI premium ranges from .55 percent to 2.25 percent of the original loan amount per year. Your credit and loan-to-value ratio impacts the premium you will be charged. As an example, if the home price is $300,000 and PMI is 1 percent, you will pay $3,000 a year or an additional $250 monthly. PMI premiums can be paid monthly as an additional charge added onto your monthly mortgage payment. There may be an up-front payment as some lenders require PMI to be paid in full at closing. Other lenders require both. It is important to consider all your options before agreeing to a loan with PMI. Remember that if you increase your down payment to 20 percent, you can avoid PMI. You may have to spend more time saving for the down payment, but you will lower your monthly payments in the long run.

At Superior Mortgage Company, Inc., we understand that buying or refinancing a home is a huge decision for most people. Our knowledge and expertise in residential and commercial loans make it possible for us to provide the best products and services available. If you are purchasing, refinancing or in need of a home equity loan, and regardless of credit problems, we can help you. Contact the company that has all the answers to your questions and can give you the information you need to make the best decision. Call us at 845-883-8200.

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Buying a Second Home

If you are lucky enough to be considering the purchase of a second home, there are a few ways to fund your new property. When making an important decision that will change your life, you must consider the benefits and costs. It should make financial sense to buy a second home. Although there are costs up front, a second home is a substantial addition to your real estate portfolio and retirement plan. It is vital to work with an experienced and knowledgeable lender, such as Superior MCI, to weigh all your options. You may not need to take out a loan on the second home if you take advantage of the following options to make a down payment or pay cash for a second home.

  • Many homeowners use a cash-out refinance on their primary home. Because home values are rising across the US, many homeowners have built up substantial equity in their primary or rental residence in the last few years. They can tap into this equity using a cash-out refinance. An example of this would be a homeowner who owes $100,000 on her mortgage. His home, however, is currently valued at $200,000 due to appreciation. The homeowner could take out some of the equity by refinancing into a bigger loan and getting the difference in cash. Consequently, the homeowner would be able to have access to a bigger down payment on the second home. Borrowers who have good credit can borrow up to 80 percent of their home’s current value with a conforming loan. FHA loans allow 85 percent cash-out refinancing and if the homeowner is a veteran, he could access 100 percent of their equity in a cash-out VA loan. With today’s low mortgage rates, cash-out refinancing may be a good way to take advantage of your home’s equity to get a second home. It’s important to be sure that you can afford a larger monthly payment on your primary home and to remember that there are additional financial obligations with a second home.
  • A home equity line of credit (HELOC) on your primary residence is a popular funding source for second home buyers. If you have sufficient equity in your home, you can take out a line of credit and buy the second home or use the funds as a down payment. In this case, you would not need to refinance your current mortgage. A HELOC could be the best way to go if you have recently refinanced and have a very low rate. Opening a line of credit does not affect your first mortgage. In some cases, you can tap into 100 percent of your home’s value. Generally, borrowers need good to excellent credit. If you are approved, you can use the cash for any reason. The interest rate is based on the prime rate, which is currently very low, making the rate lower than you would pay on a traditional mortgage. Without a new mortgage, you avoid closing costs.
  • You can also get a loan for a second home via conventional financing. Depending on your credit and other factors, current down payments can be as low as 10%.

At Superior Mortgage Company, Inc., we specialize in residential and commercial loans and provide the best products and services available. Whether you are purchasing, refinancing or in need of a home equity loan, and regardless of any credit problems, we can help you. Contact the company that can answer all your questions. Call us at 845-883-8200.

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The Pros and Cons of Reverse Mortgages

A reverse mortgage converts the equity in your home into cash. Depending upon your particular situation, you can receive a large sum all at once, establish a line of credit to draw on, or receive payments in monthly installments. Paying the loan back would proceed the same as with any other type of loan. If you choose to receive monthly installments, you are able to collect those for the remainder of your life as long as you continue to live in your home. However, there are pros and cons to getting a reverse mortgage. Some of the benefits of these types of loans are:

  • You can remain in your home.
  • You can pay off the existing mortgages on your home.
  • No monthly mortgage payments are necessary as long as your home is your primary residence, you pay the required property taxes and homeowner’s insurance and keep the home according to Federal Housing Administration requirements. If you fail to meet these requirements, you may trigger a loan default that could result in foreclosure.
  • You receive payments on flexible terms, including monthly payments, a lump sum distribution, a credit line for emergencies or any combination of these terms.
  • A reverse mortgage cannot go ‘upside down’ so your heirs will never be liable for more than the home is sold for.
  • Your heirs will inherit the house and keep the remaining equity after the balance of the reverse mortgage is paid off.
  • Loan proceeds are not taxed as income.
  • Your interest rate may be lower than traditional mortgages or home equity loans.

Some reverse mortgage cons include:

  • Fees on a reverse mortgage are the same as a traditional FHA mortgage but are higher than a conventional mortgage. The largest costs are the FHA mortgage insurance and the loan origination fee.
  • The balance of the loan gets larger over time and the value of the inheritance can decrease over time.
  • Reverse mortgages usually don’t affect your eligibility for Medicare, Social Security benefits and other entitlement programs. However, need-based government benefits such as Medicaid and SSI may be affected by a reverse mortgage loan.
  • The program is not easily understood by many individuals. This is where Superior Mortgage Company comes in. We will explain every aspect of your loan and will tell you everything you need to know.

At Superior Mortgage Company, Inc., we specialize in residential and commercial loans and provide the best products and services available. We will be happy to speak with you and answer any questions you may have. Whether you want to purchase, refinance or take advantage of a home equity loan, we can help. Contact us at 845-883-8200.

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What is the Mortgage Underwriting Process?

Lenders will not approve a mortgage without first conducting their own due diligence. A mortgage underwriter reviews, confirms and analyzes every loan application to minimize risk to the lender. Some mortgage applications get approved almost immediately while others may face denials and suspensions that can prolong the approval process for weeks or even months.

Generally speaking, larger mortgage companies can accept a higher level of risk than smaller companies. The underwriting process begins as soon as a completed application is submitted to the lender. The underwriter will review the application for clerical errors, inconsistencies and risk factors. They will contact an applicant’s employer, confirm credit reports, research assets or liabilities, and make sure that the application falls under the company’s approval guidelines.

After completing the process, which usually takes a week, the underwriter will decide as to whether the application will be approved, suspended or denied. If the application is approved, the borrower is able to meet any additional conditions and move ahead with the closing process. There are eight common issues that may affect the underwriting process. These include:

  • Income Discrepancies: Borrowers may be tempted to pad their income information to secure an approval. Underwriters compare tax returns, W2s, bank statements and other documents to assess a borrower’s true income.
  • Tax Documents: Tax documents must back up other financial information for a loan to be approved.
  • Missing Information: Underwriters need a complete set of information before they can review the information. Missing signatures or documents will prolong the process.
  • Employment Issues: Employment stability is essential for the mortgage approval process. Underwriters want to see a long term commitment to make sure a borrower can repay a loan.
  • Credit Issues: A credit history of late payments, too many lines of credit and high balances will hurt your chances of getting a loan approved.
  • Funding Issues: Underwriters must see evidence that there are available funds for the down payment, closing costs and cash reserves. They also need to know the source of the funds, how long the funds were available and where they originated.
  • Appraisals:  A low appraisal value can change the entire agreement so price reconciliation with buyers and sellers is fundamental.
  • Letters of Explanation: If there are outstanding or unusual circumstances, complex asset arrangements or other unexpected concerns, a letter of explanation can go a long way in helping underwriters understand a borrower’s personal situation.

If you understand the most common issues mortgage underwriters face, you can take steps to avoid any pitfalls. Superior Mortgage Company is dedicated to consistently expanding our knowledge of the mortgage industry by keeping abreast of every change, revision or new regulatory provision because we know that an informed client is the best client. Whether you are purchasing, refinancing or in need of a home equity loan, we can help you. Contact the company that can answer all your questions. Call us at 845-883-8200. 

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