Tag - Superior MCI

Residential vs. Commercial Real Estate Loans

If you are a property owner that is thinking about purchasing an apartment building, you are not alone. The US has generally shifted from homeownership to ‘rentership’ so the interest in multifamily investment has increased. 

Commercial real estate generates income. Residential real estate is an owned residence. However, some rental properties that produce income are financed by a residential loan. To explain, rental properties with five units and up are financed by commercial loans. Real estate brokers refer to these properties as multifamilies. Rentals with five units and under can be financed through a residential loan. However, some brokers refer to a two-family property as a multifamily which can sometimes lead to confusion. The difference is how a loan is sized during the underwriting process.

Commercial loans are sized and underwritten based on an asset’s projected net operating income (NOI). Residential loans are underwritten based on the credit worthiness and income history of the person purchasing the property. Therefore, in commercial loans, eligibility has much to do with property performance, and lenders are looking for borrowers who can answer yes to:

  • Has the asset been at least 90% occupied for the past 90 days?
  • Does the borrower have a net worth equal to or greater than the loan request?
  • Does the borrower have a minimum of nine months of principal and interest in cash on hand?
  • Does the borrower have a history of bankruptcy, foreclosure, deed in lieu or are they currently involved in a lawsuit?

None of these questions ask about a borrower’s employment history or for pay stubs. Commercial borrowers are expected to have good credit and significant net worth.

There are prepayment differences between commercial and residential loans. Commercial or multifamily borrowers should consider prepayment penalties, which are fees incurred from paying off your mortgage before it reaches maturation. Prepayment fees are not common for a home mortgage. If you take out a loan for your primary residence and suddenly come into a large inheritance, you will be able to pay off the balance of the loan without incurring any fees. If the lender issues a loan collateralized by a multifamily or commercial asset, they expect a set amount of interest revenue. If you pay off the mortgage early, the lender will need to get the interest revenue through a fee to satisfy their investors. Fannie Mae and Freddie Mac commercial loans are secured to retail and institutional investors relying on the interest income set forth in the loan. To recoup lost revenue due to an early pay-off, the loan terms frequently include a declining prepayment penalty or yield maintenance fee structure.

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 Top Mortgage Loan Issues of 2019

The mortgage industry has been subjected to continuous regulatory changes for the past decade. Some of the top issues this year are:
  • Ability-to-Repay:  The ability to repay/Qualified Mortgage rules have changed residential mortgage underwriting for every institution. These regulations have been thoroughly reviewed and lenders should expect that the review will lead to proposals to improve the current laws. It is anticipated that there will be a focus on improving legal certainty and new ways to replace the “GSE QM” provision, which is a safe harbor for most mortgage lending in residential markets.
  • HMDA Reforms:  Legislative amendments to HMDA (Home Mortgage Disclosure Act) were regulated in 2015 and are effective for reporting 2018 mortgage data. Lenders should expect stronger public and governmental scrutiny of data and should focus on fair lending exposure. There will also be a new focus on data that is publicly released. There will be Congressional and regulatory debates on HMDA reporting requirements this year as well.
  • Fair Lending:  During 2019, there will be increased focus on affordable housing, fair lending and redlining. Regulators are again looking at standards as a result of the recent Supreme Court ruling that reevaluates impact laws and guidelines under the Fair Housing Act as well as the current standards under the Equal Credit Opportunity Act. HUD will issue proposed revisions to the Fair Housing regulations before the summer of 2019.
  • Mortgage Servicing Regulations:  The CFPB (Consumer Financial Protection Board) issued new servicing regulations, along with amendments and revisions that went into effect in 2018. There will be an assessment of major portions of these regulations by the end of 2019.
  • Digital Developments and Fintech:  The digital transformation that has occurred in all financial services continues to happen. This means that everything mentioned above must be looked at through the perspective of “Fintech.” Congress and regulators will pay increasing attention to the issues and opportunities coming from digital advances, including the effects of digitized lending on credit accessibility, data standardization in mortgage servicing, the use of artificial intelligence, fair lending considerations, online remote notarization and the acceptance of e-notes.
Superior Mortgage Company is dedicated to expanding their expertise in the mortgage industry by keeping abreast of every change, revision or new regulatory provision as soon as they happen. We believe that an informed client is the best client and to that end, we make sure that you fully understand the information provided to you. 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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Avoiding Costly Mortgage Mistakes

A mortgage will probably be the biggest debt you will ever have, and a home is probably the most expensive purchase you will ever make. To lessen the stress of this important decision, it is vital to avoid the usual pitfalls such as letting a bank decide how much you should spend on a home. A mistake like this may cause you to pay more than you need, prevent your loan from closing, or may even lead to foreclosure or bankruptcy.

Smart mortgage choices are made every day, especially at Superior MCI. Home loans are available with great interest rates, low fees and pre-determined monthly payments. By doing your homework, making a budget ahead of time and thinking about your long-term plans, you can avoid getting in over your head.

Speak to mortgage professionals who can answer all your questions. For example, because fixed-rate loans are no longer at a record low, you may be tempted to get an adjustable-rate mortgage (ARM). If you are not planning to move within the next five to seven years, a fixed-rate loan may be better as you do not need to worry about refinancing a fixed-rate loan. Although an ARM offers a lower payment now, it will reset in the future, usually at a higher rate. There is a lot of risk associated with getting out of an ARM at exactly the right time. You may be unable to refinance or afford the new payment once the rates increase and the housing market at that time may make your home difficult to sell. 

The true cost of home ownership is not just the price of the home. It is important to look at the mortgage amortization schedule to determine the total amount of principal and interest you will pay. For example, borrowing $250,000 for 30 years at 4.3% will amount to $445,384. It is also vital to understand the property tax system where you live to see when taxes may increase and by how much. Property taxes add thousands of dollars to the cost of your home every year. You will also be responsible for homeowner’s insurance, possible mortgage insurance, plus all the ongoing costs of furnishing and maintaining a home while paying for things you may not have paid for as a renter such as water and trash.

If you rely on a bank to tell you what you can afford, you are making a mistake. Banks are in the business of maximizing their earnings and don’t care much about making sure you are not over-extended. Banks qualify you based on your gross (pretax) income. They don’t count monthly expenses such as insurance, utilities, child care, etc., when determining your maximum approval amount. It is best to create a budget and determine a comfortable monthly payment. A general rule is to not spend more than approximately 28% of your pretax income on principal, interest, taxes and insurance. Lenders usually assume that you can spend 36% to 45% of your pretax income on all of your debts including your home, student loans, credit cards and car loans.

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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Home Appraisal Tips to Maximize Home Value

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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What Happens During a Home Appraisal?

Getting appraisals for your home when you are buying or refinancing can be challenging. If the appraisal comes in higher or lower than the sale price, both parties will need to negotiate accordingly. Therefore, it is important to know what home appraisals consist of and what sellers can do to move the process along successfully. 

If the home you want to buy appraises for less than your offer price, you may choose to:

  • Make up the price difference by finding the additional funds to pay the amount between your down payment and your loan. The seller may also agree to lower the listing price but in today’s competitive market, this is becoming more uncommon.
  • Cancel the deal if you have an appraisal contingency. If the appraised value comes in less than the agreed on purchase price, and you do not have the necessary funds to pay the difference, you may be able to get back your deposit if you have met the terms and deadlines of your offer.

During a home appraisal, a licensed appraiser conducts an inspection of the property. If you already have a loan, the lender usually orders the appraisal as they are the ones to bring the most money to the purchase. During the home appraisal, the appraiser will review ‘comps.’ Comps for a property refer to nearby, similar properties that have recently sold. This helps the appraiser to understand the local real estate market and factor it into the property value. During the property visit, the appraiser will consider the other aspects that affect property value such as the property’s condition, value-adding or detracting features, upgrades, additions and lot size. When the appraiser is finished inspecting the property and area comps, he or she will put their findings into an appraisal report. Most importantly, they will finalize the appraised home value. 

If you are tasked with finding a reliable appraiser, find one that bases their opinion on a mix of experience and education and writes their report in a way that conforms to the Uniform Standards of Professional Appraisal Practices set by the Congress-approved Appraisal Foundation. It may be helpful to begin the search process at the federal government’s Appraisal Subcommittee Website, which provides links to state government websites that list state-certified appraisers. Check to ensure that their certifications are still valid and search the national registry to check if they have been a subject of any disciplinary actions. Contact the appraisers you are interested in and ask for references. You will want to select the appraiser with whom you feel the most comfortable based on references, pricing and the rapport you may have established.

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. Call 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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