Articles

Keeping up with the latest mortgage trends

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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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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Tips to Getting the Best Mortgage

Lenders and brokers are able to offer different prices for the same loans to different consumers, even if those consumers have the same loan qualifications. The most likely reason is that loan officers and brokers are sometimes permitted to keep some or all of the difference as extra compensation. The difference between the lowest available price for a loan product and a higher price the borrower agrees to pay is called an overage. When overages occur, they are built into the prices quoted to consumers. They occur in both fixed and variable-rate loans and can be in the form of points, fees or the interest rate. Whether quoted to you by a loan officer or a broker, the price of any loan may contain overages.

Always ask the lender or broker to write down all the costs associated with a loan and once you are informed, ask if the lender or broker will waive or reduce one or more of its fees or agree to a lower rate or fewer points. There’s no harm in asking lenders or brokers if they can give you better terms than the original ones they quoted. Once you are satisfied with the terms you have negotiated, get a written lock-in from the lender or broker. The lock-in should include the rate that you have agreed upon, the period the lock-in lasts and the number of points to be paid. Lock-ins can protect you from rate increases while your loan is being processed. However, if the rate falls, you may wind up with a higher rate.

When buying a home or commercial property, remember to shop around, compare costs and terms, and negotiate for the best deal. Remember that ‘Fair Lending’ is required by law. The Equal Credit Opportunity Act prohibits lenders from discriminating against credit applicants in any aspect of a credit transaction on the basis of race, color, religion, national origin, sex, marital status and age. The Fair Housing Act prohibits discrimination in residential real estate transactions on the basis of race, color, religion, sex, handicap, familial status or national origin.

Under these laws, a consumer cannot be refused a loan based on any of these characteristics, be charged more for a loan or offered less favorable terms for the loan.

Don’t assume that credit problems or difficulties stemming from unique circumstances, such as illness or a temporary loss of income, will limit your loan choices. If your credit report contains accurate but negative information, but there are good reasons for trusting you to repay a loan, explain your situation to the lender or broker. If your credit problems cannot be explained, you will probably have to pay more than borrowers who have good credit histories. Don’t assume that the only way to get credit is to pay a high price. Ask how your past credit history affects the price of your loan and what you should do to get a better price. Always review your credit report for accuracy before applying for a loan.

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 need a home equity loan, and even if you have credit problems, we can help. Contact us at 845-883-8200.

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Conventional vs. FHA vs. VA Loans and Mortgages

Looking for and obtaining a mortgage loan can be very challenging. Depending upon your specific needs, the process may be lengthy, confusing and ultimately disappointing. It’s imperative that you understand the differences between conventional, VA and FHA loans so you get the perfect one for you. All three loan types are issued by banks and other approved lenders.

When you apply for a home loan, you can apply for a government-backed loan such as a VA or FHA loan. Conventional loans are not insured or guaranteed by the federal government. This means that there are no guarantees for the lender if you do not repay the loan. Because of this, if you make less than a 20% down payment, you must pay for private mortgage insurance (PMI) with a conventional loan. In this way, if
you default on the loan, the mortgage insurance company ensures that the lender will be paid. Conventional loans are either conforming or non-conforming. Conventional conforming loans adhere to the rules set by Fannie Mae and Freddie Mac and are available to everyone. They are difficult to apply for because there is no government insurance so income and credit requirements are much stricter than for VA and FHA loans. Nonconforming loans also include jumbo loans, portfolio loans, and subprime loans.

An FHA loan is insured by the Federal Housing Administration (FHA). Because the loan is insured, you may qualify for a low down payment such as 3.5% of the purchase price. FHA loans have a maximum loan limit that depends on the average cost of housing in your area. As part of an FHA loan, you will pay a mortgage insurance premium (MIP) as part of the loan so that the FHA has the ability to pay the lender in the case of a loan default. Borrowers with a FICO score of less than 500 could be eligible for an FHA loan.

A VA loan is guaranteed by the Veteran’s Administration (VA). This loan is reserved for certain borrowers through VA-approved lenders so that lenders are guaranteed repayment in the case of loan default. To obtain a VA loan, you must be a current member of the US armed forces, a veteran, a reservist or national guard member, or be an eligible surviving spouse. VA mortgages are guaranteed with no money down and without the private mortgage insurance requirement. However, there is a funding fee which is a one-time charge between 1.25% and 3.3% of the loan amount.

At Superior Mortgage Company, Inc., we specialize in dozens of residential and commercial loans and provide the best products and services available. Our team can help you decide which loan fits your circumstances and answer any and all questions you may have about the process of obtaining a loan. Whether you want to purchase, refinance or take advantage of a home equity loan, we can help. Please contact us at 845-883-8200.

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Ten Questions To Ask Your Mortgage Lender

When looking for the best mortgage to fit your specific needs and situation, it is important to ask the right questions to make sure you fully understand all the aspects of your loan.

Whatever kind of mortgage you or your client need, Superior Mortgage Co., Inc. is the company to trust. We offer a wide range of mortgage products to fit your specific needs. Our VA loans offer 100% financing with all closing costs paid. We have jumbo loans up to 2.5 million, conventional loans with only 3% down, land loans, construction loans and many other loan programs. We are a mortgage company that specializes in all financial products and services related to mortgages. We are comfortable showing laymen how to navigate a variety of mortgage products and opportunities from initial contact through application and closing. We are familiar with VA, FHA, FNMA and FHLMC guidelines and regulations and residential and commercial mortgage lending practices.

Before deciding upon the best mortgage for you, there are questions to ask your prospective lender to make sure you are making the best decision. These are:

  • What type of loans do you offer and what are the qualifying guidelines for each?
  • What is the interest rate and annual percentage rate (APR)? The federal Truth in Lending Act requires lenders to give you a “good faith” estimate of the closing costs including appraisal fees, title insurance, application costs and loan-origination fees before you show up to close. The lenders you talk to must combine the fees and interest to produce an Annual Percentage Rate, showing the yearly cost of the mortgage. This will make it easier for you compare the costs of different mortgage offers.
  • What is the monthly payment going to be?
  • How large of a deposit do I need?
  • Is there a prepayment penalty?

Can you estimate and explain what fees and costs I will have to pay? Never assume that a mortgage offer is a take-it-or-leave-it deal. If you find the rate too high or the closing costs excessive, ask your lender if they can be lowered. Depending on the market and how good a credit risk you are, the lender may be willing to waive some of the closing costs. If not, you are free to secure estimates from as many lenders as possible.

  • Do you offer loan rate locks and if so, how much do you charge for them?
  • How long does it typically take for a mortgage to go through?
  • Can you guarantee you will close on time?
  • Are you going to hold this loan or sell it?

If there is anything you don’t understand or need more information about such as the size of a balloon payment at the end of the mortgage or what “points” are, ask for an explanation. If your lender is worth doing business with, they will tell you whatever you need to know. At Superior Mortgage Company, Inc., we specialize in residential and commercial loans and 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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