Tag - Superior MCI

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 Co. 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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Mortgage Mistakes to Avoid

For most of us, a home is the most expensive purchase we will ever make and consequently, the biggest debt we will ever carry. Therefore, it is imperative that you make the best decisions for you and your family before and during the loan process. Mistakes can cause you to pay more than is necessary, stop your loan from closing and potentially put you into foreclosure or bankruptcy. However, with a mortgage company like Superior MCI helping you make the right decisions, you can get a home loan with great interest rates, low fees and fixed monthly payments you can afford. Some of the most important questions to consider are:

  • Should I Get a Fixed Rate Loan?  The common wisdom is that unless you’re planning to move within five to seven years, a fixed rate loan is a better idea. An adjustable rate mortgage (ARM) may give you a lower payment now, but will reset at some point to a higher rate. It may be difficult to refinance or afford new payments once the rates increase. The housing market may also make it difficult to sell. A mortgage amortization schedule will help you see the total amount of principal and interest you will pay over the life of the loan.
  • Should I Let the Bank Tell Me What I Can Afford?  Banks earn profits for their shareholders by maximizing their earnings. They are not concerned about whether you overextend yourself. Banks usually qualify you for a loan based on your pretax income (gross) income without accounting for all your monthly expenses.
  • Should I Check and Fix My Credit?   Checking your credit with the three major credit bureaus, Experian, Equifax and TransUnion, is free when using annualcreditreport.com. Mistakes are common and can lead to higher rates.
  • Is a Loan Final Before Closing?  The answer is an emphatic no. Accordingly, during this time, avoid quitting your job, don’t open new credit cards, don’t make other large purchases and don’t miss any deadlines for returning loan paperwork.
  • Should I Ignore the APR?  Some lenders may advertise lower interest rates but make up for them with higher fees. You should compare annual percentage rates between mortgage offers to determine which one really costs the least. APR includes the lender’s fees and shows the loan’s true cost.
  • Should I Carry Two Mortgages?  If you are moving from one house to another, you may be tempted to buy the new one before selling your current home. However, an unsold home with a mortgage may mean carrying two loans because it is generally easier to buy a new home than sell your current home.
  • How Much Money Should I Put Down?  If you put little to nothing down, such as 3.5% with an FHA loan or 5% with a conventional loan, you may require private mortgage insurance (PMI), which is usually $20 to $50 per month per $100,000 borrowed.
  • Should I Get Pre-Approved for the Loan?  Talk to at least three lenders to get pre-approved. It does not cost anything and allows you to make a competitive bid.

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

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Using a Cash-Out Refinance to Buy a Home

Millions of American homeowners are thinking about refinancing their home in today’s market because real estate equity has greatly increased in recent years. Homeowner equity went from $6 trillion in 2009 to $15 trillion in 2018. This equity can be converted into financing for school, business or the purchase of a second home or investment property. The ability to do so depends on several factors, including:

  • The amount of your home equity
  • Your credit rating

If you want to buy and then sell or refinance another home, a bridge loan may be best. You can also choose a HELOC or home equity line of credit. Determining how much equity you have seems simple if you subtract what you originally paid for the home and what it is worth now. However, many lenders allow cash-out refinancing equal to 80% of your equity. If the property value is $275,000, they will subtract 20%, leaving approximately $220,000. The money will go toward repaying the existing loan of $85,000, for example, and the balance of $135,000 is available for the borrower. A VA cash-out mortgage allows borrowers to refinance up to 100% of their equity. All programs come with various charges and insurance costs so speaking with a mortgage professional, like the ones at Superior MCI, can help you to avoid some of these extra charges.

With cash-out refinancing or a HELOC, you generally cannot use the funds to buy another home you want to move into quickly because cash-out refinancing and HELOCs usually have a clause that says you expect to remain in your home at least one year. If this rule is violated, the lender may call in the loan and demand immediate repayment. HELOCs have other drawbacks such as an interest rate that is likely to be adjustable and not fixed. The interest rate is usually higher than a first mortgage, depending upon your credit, the amount borrowed, location and equity. You must also review the HELOC balances to avoid heavy monthly costs. HELOC’S have two phases:

  • Drawing Phase:  You can draw money out, put money back in and make interest payments on the balance.
  • Repayment Period:  You cannot draw money out. You must repay the balance over the remaining term of the loan, possibly incurring large monthly repayment costs.

A “bridge” loan is designed to help you move from one residence to another. It is intended to be short-term financing that may be for just a few months and there are no monthly payments. In a bridge loan, the interest rate may be high and there may be a lot of up-front fees. However, if you want to purchase a replacement home, after selling your current residence, the bridge loan is paid off at closing.

At Superior Mortgage Co., 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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When to Consider Refinancing Your Home

A home refinance could be a very smart move or a very big mistake. Refinancing may keep more money in your account and less in the bank’s. Refinancing could bail you out of an emergency or let you retire earlier. But it only works when you take out the right loan for the right reasons. The right reasons for refinancing include:

  • Better interest rates are currently available.
  • You can pay off your mortgage faster.
  • Your ARM rate could go higher unless you lock in a fixed rate.
  • Getting a government loan could make your property easier to sell in a few years.
  • You can increase the home’s value by making home improvements.
  • You can keep the interest rate low.

Wanting to refinance to save money is an easy decision. However, refinancing because you want a new car, you’re going to Las Vegas and need cash, your son wants another postgraduate degree, etc. are not good reasons for refinancing. Most financial experts will agree that long-term loans, such as mortgages, should not be used for short-term pleasures.

First determine how long you plan to keep your house and if you’re able to save money during this time. Ask the lender about no-cost refinancing. This type of refinancing offers a higher interest rate in return for the lender covering the financing costs. If you are planning to sell your house in a few years, you might consider a 3/1 ARM. You could trade your 30-year fixed rate at 4.0 %, for example, for a 3/1 ARM at 2.5 %. A mortgage calculator can help you when thinking about a mortgage refinance. You can also contact Superior MCI to get the best offer to save you the most money. If you have been paying your home mortgage for many years, you can shorten the payoff period and possibly get a lower interest rate. For example, if you had a $300,000 mortgage at 4.5 % for the last eight years, your balance may be about $254,451, making your principal and interest payment about $1,520.  If you refinance your loan to a 15-year mortgage and your rate lowers to 3.25 %, your payment may increase to $1,788 but your mortgage will be repaid eight years sooner. That is about $145,000 in payments you won’t have to make.

As long as you understand the true cost of refinancing, make an informed decision, and create a budget and plan for repayment, you can refinance your home to pay off a higher interest debt, finish college or take care of a family emergency. Sometimes in life, you need financial breathing room. Superior Mortgage can help you with the math and make sure that you are making the best decision for you and your family.

At Superior Mortgage Co., 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 credit problems, we can help you. Contact the company that can answer all your questions and give you the information you need to make the best decision. Call us at 845-883-8200. 

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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 Co., 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 Co. 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 Co., 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 Co., 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 1.

If you are interested in buying a home, your lender will order an appraisal of the property you are interested in purchasing to make sure that you are not overpaying for your home. If you are refinancing a home you already own, an appraisal is necessary to ensure that the seller does not lend more money that the property is actually worth.

A home appraisal is an estimate of what a home is worth. The estimate is sometimes referred to as the fair market value of the property. Home appraisers are licensed professionals who are expert at assessing real estate value. They are unbiased as they do not work for you or the lender. They are seen as an independent third party in the mortgage process. They consider factors such as the location of the home and its size to get the home’s true value. They will look at the home’s structure, fixtures and appliances. The difference between this and a home inspection is that the appraiser assesses the condition of the home to determine a fair value. The inspector protects the buyer by identifying problems in the home such as non-working electrical outlets, faulty toilets and other problems.

If you are refinancing your home, you want to get the highest appraisal value. Some tips to increasing your chances for a higher value are:

  • Because it is your home and you may not be objective about what repairs or improvements it needs, it is a good idea to get the opinion of a friend or family member.
  • Decluttering your home will make each room look better and will make it easier for them to view your home in a more favorable way.
  • Any upgrades or improvements you made in your home may not be obvious such as new air conditioning units, windows or landscaping. It is helpful to provide the appraiser with a list of upgrades so they can include them in their report.

If you are selling your home, let your appraiser know about every offer that has been made for your home. You should remain at the property when your appraiser is there to answer any questions or provide information. Always make sure your home is tidy and well-organized. There are several ways to make your home look bigger and brighter such as replacing lightbulbs, adding mirrors to reflect natural light and pulling furniture away from the walls. Give the appraiser a list of comparable properties in the area and their final sales price.

If you are buying a home, do your homework and be aware of the current market. Hire a real estate person who knows your area well. If you think that the appraiser may have made an error in their report, you may appeal it. Read the report thoroughly to look for any incorrect information. Your lender will help you with this process. Remember that a fair value for your home protects you and your lender.

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

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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 Co., 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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